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UNIVERSITY  of  CALIFORNT* 

AT 

LOS  ANGELES 
LIBRARY 


PRINCIPLES  OF  BOOKKEEPING 


AND 


FARM  ACCOUNTS 


BY 

J.   A.   BEXELL 

DEAN    SCHOOL    OF    COMMERCE,    OREGON    AGRICULTURAL    COLLEGE 
CORVALLIS,    OREGON 

AND 

•2.7060 

F.   G.   NICHOLS 

DIRECTOR    BUSINESS    EDUCATION,    DEPARTMENT    OF    PUBLIC    INSTRUCTION 
ROCHESTER,    N.  Y. 


SCRIPT   ILLUSTRATIONS   BY   E.   C.    MILLS 


AMERICAN  BOOK   COMPANY 

NEW  YORK  CINCINNATI  CHICAGO 


COPYRIGHT,    1913,   BY 

J.    A.  BEXELL  AND  F.  G.   NICHOLS. 


COPTBIGHT,  1913,  IN  GBEAT  BRITAIN. 


W.  P.  I 


PREFACE 

FARMING  is  the  oldest  and  in  many  respects  the  most  important  occupation 
of  man.  It  dates  back  beyond  the  dawn  of  history,  yet  one  of  the  modern 
"Captains  of  Industry"  recently  remarked  that  "Farming  is  the  most  modern 
business  in  the  world."  This  is  certainly  true  as  regards  the  application  of 
sound  business  methods. 

In  the  mad  rush  for  wealth  and  power,  we  seem  to  have  lost  sight  of  the  true 
principles  of  economy.  One  of  these  principles  is  the  art  of  keeping  accounts. 
One  of  the  greatest  authorities  on  bookkeeping  says,  "The  ability  to  pre-deter- 
mine  results  by  means  of  accurate  accounts  and  statistics  is  the  highest  develop- 
ment of  the  modern  business  man."  That  the  farmer  needs  to  develop  the  same 
ability  to  " pre-determine  results"  needs  no  argument.  Very  few  farmers  of 
to-day  have  a  definite  knowledge  of  their  business. 

Farm  accounts  must  be  simple,  easily  kept,  and  readily  understood  to  make 
them  effective  and  practical.  Hon.  James  Wilson  says:  "I  would  not  impose 
on  a  busy  farmer  the  keeping  of  an  elaborate  set  of  books,  but  some  simple 
form  of  accounts  will  be  a  great  aid  in  successful  farming."  Mr.  John  Ham- 
ilton, Farmers'  Institute  Specialist,  says :  "  In  my  judgment  no  single  study 
outside  of  the  essential  branches  of  writing,  reading,  and  arithmetic  would  be 
of  more  service  than  the  study  of  an  efficient  method  of  keeping  accounts. 
It  is  a  universal  need." 

In  The  Country  Gentleman  magazine,  the  following  clear  statement  of  the 
need  of  up-to-date  business  methods  for  the  farmer  is  made :  "  Business  methods 
are  indispensable.  The  man  who  does  not  know  what  his  annual  income  is 
should  wake  up  and  find  out.  Only  bookkeeping  will  do  the  trick.  Alter  he 
has  adopted  it  he  may  discover  that  he  has  been  relying  on  some  one  crop  to 
make  up  for  the  deficiencies  of  others.  Then  his  sins  of  omission  will  rise  up 
against  him  like  a  nightmare,  and  he  will  be  convinced  that  business  is  business 
just  as  truly  as  farming  is  farming  —  and  that  the  latter  cannot  thrive  without 
the  former." 

3 


4  PREFACE 

The  authors  and  publishers  of  this  book  feel  that  this  great  need  can  best  be 
met  by  introducing  bookkeeping  and  business  methods  in  both  graded  and 
ungraded  schools  where  there  are  boys  and  girls  who  are  looking  forward  to 
agriculture  as  a  life  work.  They  realize  that  they  are  attempting  pioneer  work 
and  therefore  lay  no  claim  to  perfection.  It  is  their  hope  that  they  have  to  some 
extent,  at  least,  met  the  present  need  for  a  textbook  of  this  kind,  and  laid  the 
foundation  for  better  work  along  this  line  in  the  future. 

The  forms  and  bookkeeping  methods  which  they  have  used  have  stood  the 
test  of  extensive  use,  and  are  put  forward  with  full  confidence  that  they  will  be 
found  satisfactory  for  purposes  of  instruction  and  equally  satisfactory  for  actual 

farm  use. 

J.  A.  BEXELL, 

F.  G.  NICHOLS. 


CONTENTS 

PACK 

INTRODUCTORY            7 

PRINCIPLES  OF  BOOKKEEPING 

LESSON 

1.  RULING  AND  PREPARING  FORMS 8 

2.  PRIVATE  PERSONAL  ACCOUNTS  : 9 

3.  Students'  Accounts 13 

4.  HOUSEHOLD  ACCOUNTS 17 

5.  REVIEW  QUESTIONS,  LESSONS  1,  2,  3,  4 21 

6.  POULTRY  ACCOUNTS 22 

7.  FINANCIAL  STATEMENT 26 

8.  REVIEW  QUESTIONS,  LESSONS  6,  7 29 

9.  PRINCIPLES  OF  DOUBLE  ENTRY  —  DEBITS  AND  CREDITS 30 

10.  MODEL  DOUBLE  ENTRY  SET,  JOURNAL            36 

11.  REVIEW  QUESTIONS,  LESSONS  9,  10 45 

12.  LIVE  STOCK  SET,  JOURNALIZING 46 

13.  LIVE  STOCK  SET,  POSTING 48 

14.  LIVE  STOCK  SET,  TRIAL  BALANCE  AND  BALANCE  SHEET 49 

15.  LIVE  STOCK  SET,  CLOSING  THE  LEDGER 51 

16.  REVIEW  QUESTIONS,  LESSONS  12,  13,  14,  15 53 

17.  PRODUCE  SET 55 

18.  PRODUCE  SET,  TRIAL  BALANCE  AND  FINANCIAL  STATEMENT      ....  56 

19.  PRODUCE  SET,  CLOSING  THE  LEDGER 56 

20.  SPECIAL  BALANCE  SHEET,  EXERCISE  No.  1 56 

21.  SPECIAL  BALANCE  SHEET,  EXERCISE  No.  2 57 

21.  SPECIAL  BALANCE  SHEET,  EXERCISE  No.  3,  SUPPLEMENTARY     .        .        .        .57 

22.  SPECIAL  CLOSING,  LEDGER,  EXERCISE  No.  1 58 

23.  SPECIAL  CLOSING,  LEDGER,  EXERCISE  No.  2 59 

23.  SPECIAL  CLOSING,  LEDGER,  EXERCISE  No.  3,  SUPPLEMENTARY  .        .        .        .59 

24.  SIX-COLUMN  BALANCE  SHEET - 60 

25.  REVIEW  QUESTIONS,  LESSONS  19,  20,  21,  22,  23,  24 61 

26.  BILLS  RECEIVABLE  AND  BILLS  PAYABLE 63 

27.  SPECIAL  EXERCISE  ON  BILLS  PAYABLE 64 

5 


6  CONTENTS 

LK8SON  PAGE 

28.  SPECIAL  EXERCISE  ON  BILLS  PAYABLE  AND  BILLS  RECEIVABLE       ...  65 

29.  REVIEW  QUESTIONS,  LESSONS  26,  27,  28 67 

30.  BANKING 68 

31.  REVIEW  QUESTIONS,  LESSON  30 .72 

32.  THE  BUSINESS  LETTER 73 

33.  REVIEW  QUESTIONS,  LESSON  32 78 

34.  BUSINESS  FORMS  AND  OFFICE  EQUIPMENT 79 

35.  REVIEW  QUESTIONS,  LESSON  34 89 

FARM   ACCOUNTS 

36.  FARM  SET  I,  INVENTORY     .  

37.  THE  FARM  PLOT  FOR  FARM  SET  I 

38.  THE  SPECIAL  FARM  CASH  BOOK,  WITH  TRANSACTIONS       .        .        .  •  . 

39.  FARM  SET  I  —  Continued 

Financial  Statement  .............  104 

Cash  Statement 104 

Analysis  of  Profits  and  Losses 106 

Summary  of  Profits  and  Losses 106 

40.  FARM  ACCOUNTS  WITH  PERSONS 108 

41.  EXERCISES  IN  FARM  STATEMENTS 110 

42.  REVIEW  QUESTIONS,  FARM  SET  I Ill 

43.  FARM  SET  II,  INTRODUCTORY  AND  PARTNERSHIP  AGREEMENT  ....  113 

44.  Inventory    ..............  115 

45.  The  Farm  Plot 121 

46.  The  Cash  Book  —  Ledger 123 

47.  The  Cash  Book  —  Ledger — Continued 134 

48.  Valuation  and  Depreciation 140 

49.  Special  Cost  Records 144 

Labor  Report 146 

Feed  Record 147 

50.  Cost  Accounts  of  Crops 149 

51.  Cost  Accounts  of  Live  Stock 155 

52.  Cost  Summaries 157 

53.  The  Annual  Statement 159 

54.  Review  Questions,  Farm  Set  II         .........  162 

55.  SHORT  MERCANTILE  SET,  FARM  IMPLEMENT  BUSINESS 165 

Cash  Book *  .        .....        .        .        .166 

Sales  Book       • 168 

Purchase  Book 169 

56.  REVIEW  QUESTIONS,  LESSON  55 175 

INDEX.       .                 177 


PRINCIPLES    OF   BOOKKEEPING 


INTRODUCTORY 
2.7  a  o  o 

1.  A  business  transaction  is  an  exchange  of  values  in  the  form  of  property 

or  service.     Thus  it  will  be  seen  that  a  gift  is  not,  properly  speaking,  a  business 
transaction. 

2.  If  one's  business  consists  of  only  a  few  transactions,  it  may  not  be  necessary 
to  record  them,  but  if  the  transactions  are  many,  it  is  not  safe  to  trust  to  memory. 
They  should  be  properly  recorded  in  books  arranged  conveniently  for  this  pur- 
pose, and  the  art  of  making  such  records  is  called  bookkeeping. 

3.  It  is  often  necessary  to  show  other  people  facts  about  our  business  trans- 
actions, and  this  can  be  done  only  by  means  of  accurate  records.    Young  people 
should  early  cultivate  the  habit  of  making  records  of  daily  receipts  and  expen- 
ditures, and  also  of  all  credit  transactions.     Such  a  practice  will  serve  as  a  check 
on  extravagance  and  inculcate  systematic  business  habits  that  will  be  of  incal- 
culable value  in  later  life. 

4.  Bookkeeping,  as  is  stated  above,  is  a  systematic  record  of  business  trans- 
actions.   The  objects  of  keeping  books  are  to  preserve  a  permanent  history  of 
a  business  and  to  be  able,  at  any  time,  to  determine  its  exact  financial  condition. 
Properly  kept  records  also  furnish  us  details  of  business  that  show  one  who 
knows  how  to  interpret  them  just  where  the  gains  are  being  realized  and  where 
losses  are  being  sustained.     Annual  comparisons  make  it  possible  to  conduct 
business  more  intelligently  and  to  produce  profits  that  justify  the  expenditure 
of  labor  and  money  necessary  to  carry  on  a  business  enterprise. 

5.  All  records  that  are  made  at  the  time  the  transactions  take  place  for  the 
purpose  of  being  summarized  later  under  appropriate  heads,  are  known  as  original 
records.     In  case  of  legal  disputes  between  the  parties  to  such  transactions,  these 
original  records  are  the  only  ones  that  are  accepted  as  evidence  in  a  court  of 
law,  and  they  are  accepted  only  when  properly  made.     There  must  be  evidence 
of  accuracy  and  system,  therefore  all  bookkeeping  work  should  be  done  with  the 
greatest  possible  care.     Aim  to  be  neat  and  accurate  in  your  work  —  speed  will 
be  a  natural  and  necessary  result  for  which  you  need  not  consciously  strive. 

7 


PRINCIPLES  OF  BOOKKEEPING 


Illustration  O 


LESSON  1 
RULING  AND  PREPARING  FORMS 

6.  A  great  many  bookkeeping  forms  are  standard  and* can  be  purchased 
from  stationers  almost  anywhere,  but  often  it  becomes  necessary  to  prepare 

labor-saving  records  especially  suited  to  a 
particular  business.  To  be  able  to  design 
a  suitable  form  and  to  rule  it  properly  is 
a  valuable  accomplishment.  As  in  all 
mechanical  work,  proper  tools  are  of  the 
utmost  importance.  For  the  next  exercise, 
you  will  need  the  following :  A  sharp  pencil, 
two  penholders  with  medium  fine  pens,  a 
ruler,  red  and  black  fluid  (not  ink),  a  sheet  of 
horizontally  ruled  paper,  and  a  clean  blotter. 
7.  Always  keep  your  pencil  well  sharp- 
ened. Use  neither  too  hard  nor  too  soft 
lead.  The  pen  points  of  a  new  pen  should 
be  moistened  and  thoroughly  wiped  before 

using,  because  each  pen  was  oiled  before  it  was  packed,  to  prevent  rusting. 
The  beveled  edge  of  the  ruler  is  used  for  ruling.     See  illustration  O. 

WRITTEN  EXERCISES 

(1)  Place  the  sheet  of  blank  paper  so  that  the  lower  edge  is  parallel  with  the 
edge  of  the  table  or  desk.     Place  the  ruler  with  the  numbered  edge  toward  you 
(A}  and  the  sharp  edge  down.     Along  the  beveled  edge  (5)  rule  as  many  red 
lines  as  you  can  without  moving  the  ruler,  by  merely  tipping  the  pen.     You 
will  rule  a  better  line  by  drawing  the  pen  rapidly  and  lightly.     Practice  until 
you  can  rule  a  perfectly  smooth  and  straight  line. 

(2)  Rule  a  dozen  lines  with  lead  pencil  and  then  trace  them  with  the  red 
ink  pen.     See  how  truly  and  smoothly  you  can  do  the  tracing. 

(3)  Rule  a  red  line  on  either  side  of  each  blue  line  on  a  sheet  of  horizontally 
ruled  paper.     Draw  the  red  lines  as  close  as  possible  to  the  blue  line  without 
having  the  lines  touch  each  other.     Use  the  blotter  freely. 

(4)  On  a  slip  of  paper  8  inches  wide,  plan  the  form  shown  in  illustration  1, 
page  10.     Allow  f  inch  for  each  cents  column  and  f  inch  for  each  of  the  dollar 


PRIVATE  PERSONAL  ACCOUNTS  9 

columns.  Now  from  your  sketch  mark  the  spaces  at  the  top  and  15  lines  below 
on  a  horizontally  ruled  sheet,  and  then  rule  the  form  completely  with  red  fluid. 

(5)  In  a  similar  manner  rule  the  forms  shown  in  illustrations  2  and  3,  pages 
14,  15, 18,  and  19,  using  j  of  a  page  for  each  form.  Use  both  sides  of  the  paper. 

Hand  in  your  work  for  approval. 

LESSON  2 
PRIVATE  PERSONAL  ACCOUNTS 

8.  The  foundation  for  business  success  should  be  laid  early  by  learning  the 
value  of  money  and  its  correct  use.     All  successful  business  men  agree  that  this 
can  best  be  done  by  systematically  recording  our  cash  receipts  and  expenditures, 
and  by  mastering  the  art  of  bookkeeping  at  an  early  age. 

9.  It  should  be  remembered  that  all  the  advantages  and  comforts  we  enjoy 
are  the  results  of  labor  and  saving.     There  could  be  no  civilization,  no  comfort- 
able homes,  no  schools,  no  churches,  no  enjoyments  without  saving.     Savings 
are  generally  measured  in  money,  and  it  is,  therefore,  regarded  as  one  of  the 
most  desirable  forms  of  property. 

10.  We  can  learn  many  important  lessons  from  the  experience  of   suc- 
cessful business  men ;  how  they  laid  the  foundation  of  their  business  success. 
Countless  illustrations  could  be  given  from  every  walk  of   life.     Successful 
farmers,    merchants,    manufacturers,    and    bankers    all    agree    that   the    four 
fundamental  principles  of  their  success  are :  (1)  Labor,  (2)  Business  Enter- 
prise,   (3)    Skill  and    Knowledge   of   One's   Business,    and    (4)    Economy   or 
Saving. 

11.  Knowledge  of    one's  business  is  gained  primarily   from    records  and 
accounts,  and  true  economy  is  generally  the  result  of  carefully  analyzing  these 
records.     It  is  not  only  the  actual  information  the  accounts  and  records  afford, 
but  the  attitude  toward  one's  business  and  the  indirect  effect  which  are  the  most 
important  results  of  carefully  kept  accounts. 

12.  In  order  that  the  accounts  shall  be  of  greatest  value,  it  is  of  the  utmost 
importance  that  a  correct  classification  be  made.     One  must  decide  in  advance 
just  what  information  is  desired  and  then  arrange  the  records  accordingly,  just 
as  the  architect  prepares  his  plans  before  the  building  is  begun. 

13.  In  the  personal  accounts  illustrated  in  lessons  2  and  3  the  different 
classes  of  receipts  and  expenditures  are  printed  at  the  head  of  the  columns,  as 


10 


PRINCIPLES  OF  BOOKKEEPING 


\W-IVO\S 


•YoUX 


2.0 


2-0 


Jo 


/  2- 
3 


3J~6 


3o 


Sff 


7-o  /(,oj  JV-oo      /  £o        /a        3.0        03  Jo 


to 


Illustration  1 

in  illustrations  1  and  2,  pages  10,  14,  and  15,  and  the  results  are  found  in  the 
totals  of  the  different  columns. 

14.  In  the  next  exercise  we  shall  use  what  is  known  as  a  special  column  cash 
book.  All  the  columns  except  the  totals  are  called  distribution  columns.  Note 
that  the  sum  of  the  footings  of  the  distribution  columns  equals  the  footing  of 
the  total  columns.  Every  page  should  be  proved  before  the  amounts  are  for- 
warded. It  is  generally  best  to  forward  the  total  amounts  from  month  to  month 
until  the  end  of  the  year. 

ROCKEFELLER'S  LEDGER 

Speaking  of  his  early  struggles  and  of  the  foundations  of  his  success  at  a 
social  gathering  of  young  men,  Mr.  Rockefeller  said : 

"  I  have  brought  with  me  to  show  you  young  men  a  little  book  —  a  book 
which  may  interest  you.  It  is  the  first  ledger  I  kept.  I  was  trained  in  business 
affairs  and  I  was  taught  how  to  keep  a  ledger.  The  practice  of  keeping  a  little 
personal  ledger  by  young  men  just  starting  in  business  and  earning  money  and 
requiring  to  learn  its  value  is,  I  think,  a  good  one 

"  This  little  book  shows  largely  what  I  received  and  what  I  paid  out  during 
my  first  years  of  business. 


PRIVATE  PERSONAL  ACCOUNTS  11 

"  I  paid  my  own  bills,  and  always  had  a  little  something  to  give  away,  and  the 
happiness  of  saving  some.  It  is  true  I  could  not  secure  the  most  fashionable 
cut  of  clothing.  I  did  not  make  any  obligations  I  could  not  meet.  I  lived 
within  my  means,  and  my  advice  to  you  young  men  is  to  do  just  the  same. 

"Now  let  me  leave  this  little  word  of  counsel  for  you.  Keep  a  little  ledger, 
as  I  did.  Write  down  in  it  what  you  receive,  and  do  not  be  ashamed  to  write 
down  what  you  pay  away.  See  that  you  pay  it  away  in  such  a  manner  that  your 
father  or  mother  may  look  over  your  book  and  see  just  what  you  did  with  your 
money.  It  will  help  you  to  make  money,  and  that  you  ought  to  do." 

WRITTEN  EXERCISE 

Below  are  the  receipts  and  expenditures  of  a  young  girl  during  the  first 
three  months  of  school,  eighth  grade.  In  making  her  purchases  she  was  assisted 
by  her  mother,  but  she  kept  her  accounts  just  as  if  she  had  made  them  inde- 
pendently. The  experience  proved  a  valuable  lesson,  as  it  showed  her  how  much 
she  cost  her  parents. 

Directions.  On  a  practice  sheet  rule  a  cash  account  as  shown  in  illustra- 
tion 1,  page  10.  Use  the  form  in  lesson  1  if  it  is  satisfactory. 

With  a  ruler  mark  the  spaces  on  a  separate  slip  of  paper  f  inch  for  each 
cents  column  and  f  inch  for  each  dollar  column,  or  f  inch  for  each  money 
column.  This  will  require  5f  inches  of  the  right  side  of  your  page;  f  inch 
will  be  required  for  the  date  column  at  the  left.  The  remainder  of  the  space 
will  be  the  items  column.  Place  the  slip  at  the  top  of  the  page  and  mark  the 
lines  to  be  ruled ;  do  the  same  at  the  bottom.  Now  complete  the  ruling,  which 
may  be  done  in  pencil  in  this  exercise.  Write  the  present  year  at  the  top  of 
the  date  column  and  then  fill  in  the  transactions  with  not  more  than  two 
entries  on  each  line.  The  first  six  lines  will  be  exactly  as  illustrated. 

TRANSACTIONS 

DATE 
Sept.     20  —  Cash  from  mother,  $  20. 

20  —  Coat,  $  10.50 ;  books,  $  1.50. 

25  —  Shoes,  $  3.50 ;  post  cards,  10  £ 

26  —  Amusement,  20  £ ;  candy,  10  j£. 
28  —  Church,  5  p. 

30  —  Ink,  5  j£ ;  eraser,  5  ff . 


12  PRINCIPLES  OF  BOOKKEEPING 

Oct.         1  —  Medicine  (sundry  column),  50  0. 

2  —  Ice  cream,  10  £ ;  ribbons,  30  £. 

3  —  Pencils,  10  0 ;  paper,  10  jzf. 

6  —  From  mother,  $  7. 

8  —  Church  social,  15  £ ;  nuts,  10  0. 

9  —  Amusement,  50  j£. 

11  —  Necktie  for  brother,  25  ff. 

12  —  Umbrella,  $  1.50 ;  cap,  50  £ 

14  —  Oranges,  10^;  skating,  10  f£. 

15  —  Notebook,  10  £ ;  picnic,  25  0. 

16  —  C.  Endeavor,  10  £ ;  Sunday  School,  5  j£. 

19  —  Rubbers,  65  £. 

20  —  Book,  85  £ ;  car  fare,  10  $. ;  pictures  (gift),  15  £ ;  handkerchief,  25  j£. 

24  —  Sunday  school,  5  j£. 

25  —  Tablet,  10  i ;  pens,  5  £ 

28  —  Entertainment,  25  £ ;  candy,  15  £. 
Nov.         1  —  Medicine,  75  j£ ;  gloves,  25  0. 

3  —  Pencil,  5  j£ ;  skating,  10  j*. 

4  —  Cash  from  mother,  $  9. 

5  —  Sunday  school  and  church,  20  £. 

7  —  Sandwiches,  15  £ ;  popcorn,  5  j£. 

8  —  Stockings,  50  £ ;  dress,  $  2.50. 
11  — Tablet,  5^;  eraser,  5j£. 

15  —  Church  social,  15  j£ ;  ribbon,  10  ji. 

16  —  Amusement,  20  j£. 

17  —  Car  fare,  10  ^ ;  stamps,  10  j£. 
19  —  Paints,  25  £ ;  cookies,  10  j£ . 

22  —  Missions,  20  j£ ;  Y.  W.  C.  A.,  $  1. 

26  —  Stationery  (gift  to  George),  50^. 

27  —  Notebook,  15  i ;  ink,  5  £ 

29  —  Ice  cream,  20  £ ;  candy,  10  £. 

Now  total  each  column  and  write  the  sum  in  light  lead  pencil  figures  until 
found  correct.  Prove  your  work  by  adding  together  the  totals  of  all  the 
columns  to  the  right  of  the  total  column.  This  should  equal  the  sum  of  the 
total  column.  When  found  correct,  write  the  totals  in  ink.  Show  the  balance. 

Hand  in  your  exercise  for  approval.  When  it  is  returned  to  you,  copy  it  on 
the  ruled  sheet  provided  for  the  records  of  this  lesson. 


STUDENTS'  ACCOUNTS 


13 


15.  Henry  Jones,  having  finished  his  high  school  course,  has  now  entered 
college.  His  father  has  promised  to  advance  two  thirds  of  his  expenses  on 
condition  that  he  report  at  the  end  of  each  semester  his  receipts  and  expen- 
ditures on  the  following  form : 


CASH  ACCOUNT  FROM 


RECEIPTS  : 


TO 


191 


PAYMENTS  : 


For  work 
From  home 
Unclassified 


For  board  and  room 

For  clothing 

For  laundry  and  toilet 

For  fees  and  dues 

For  books  and  stationery 

For  furniture 

For    amusements    and 

refreshments 
For  travel 

For  doctor  and  medicine 
For  church  and  benevolence 
For  gifts 
For  savings 
For  unclassified 

Balance 


16.  For  the  purpose  of  enabling  him  to  fulfill  the  conditions,  he  has  adopted 
the  form  of  cash  book  shown  in  illustration  2,  pages  14  and  15. 

17.  In  the  "Board  and  Room"  column  are  entered  all  regular  expenses 
under   this   head,  but   no   extra   lunches   or   refreshments.     Under    "Cloth- 
ing"  are   entered    purchases   and   mending,  but  not  pressing  and  cleaning, 
which  are  entered  under   "Laundry  and  Toilet."    The   remaining   columns 
are   self-explanatory,  except   the  "Unclassified"  column;   in   it   are   entered 
all    items    which    cannot    properly    be    entered    in   the   special   distribution 
columns.     It  is  only  another  name  for  "  Sundries." 


14 


PRINCIPLES  OF  BOOKKEEPING 


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5-3.16 


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06 


'Of 


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Illustration  2 

18.  For  convenience,  the  receipts  are  entered  on  the  left,  or  debit  side  and 
the  payments  on  the  right,  or  credit  side.     A  total  column  is  provided  for  both 
the  receipts  and  expenditures. 

19.  It  is  preferable  to  carry  the  totals  forward  until  the  end  of  the  year, 
rather  than  to  forward  only  the  balance. 

WRITTEN  EXERCISE 

Directions.  Unless  ruled  paper  is  provided  in  your  outfit,  you  will  rule  the 
form  shown  in  illustration  2,  pages  14  and  15,  on  a  double  page  of  practice 
paper,  first,  with  pencil,  and  have  it  approved,  and  second,  with  pen  and  ink. 
Allow  the  same  space  for  the  money  columns  as  in  the  last  lesson.  Write 
or  print  the  headings  very  plainly.  Use  the  form  prepared  in  lesson  1  if  it  is 
satisfactory. 


STUDENTS'  ACCOUNTS 


15 


6  M 


t-o 

7 

2- 

J  A 


2- 


/ff 


3J 


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7 


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7  */ 


f  & 


Illustration  2 


You  will  then  write  up  the  receipts  and  payments  for  a  part  of  September  and 
all  of  October,  present  year.     September  20  to  30  will  be  exactly  as  illustrated. 


TRANSACTIONS 

Sept.    20  —  Amount  of  cash  on  hand,  $53.40.     (In  both  the  total  and  un- 
classified columns.) 
20  —  From  home,  $  100. 

20  —  Entrance  fee,  $  7 ;  barometer,  $  1 ;  laboratory  fees,  $  5.50. 

21  —Board  and  room,  9/20  to  10/4,  $  10;  baggage  transfer,  250. 

23  —  Textbooks,  $  7 ;  stationery,  55  ff . 

24  —  Laundry,  60  0 ;  shoes  repaired,  $  1 ;  mother's  birthday  gift,  $  1. 

25  —  Library  table  and  chair,  $  5 ;   theater,  75  0 ;   paid  Students'  Loan 

Fund  and  interest,  $25.75  (unclassified). 


16 

Sept.    25  —  Jefferson  Club,  $  1 ;  dentist,  $  2 ;  haircut,  35  £. 

26  —  From  Uncle  Ben,  $  10 ;   received  for  splitting  wood,  $  5 ;  trip  to 
Eugene,  $2.35;  Y.  M.  C.  A.,  $  1. 

30  — Accident  insurance,  $2.25  (policy  $  1000)  ;  car  fare,  10  £ 
Oct.        2  —  Gloves,  $  1.10 ;  book,  95  t ;  post  cards,  30  £. 

3  —  Laboratory  apron,  35  £  (unclassified) . 

4  —  Jefferson  Club,  $  1 ;  dentist,  $  2 ;  board  and  room,  $  5. 

5  —  Films,  50^;    dictionary  stand,  $3.50;   laundry,  75^;    medicine, 

25^;  car  fare,  15^. 

7  —  From  H.  C.  Smith  for  work  on  lawn,  $  5. 

8  —  Football  game,  50  f5 ;  Y.  M.  C.  A.,  $  1. 

10  —  Suspenders,  75  j£ ;  photo  developer,  30  £. 

11  —  From  home,  $  50 ;  deposited  in  savings  bank,  $  10. 

12  —  Paid  for  10  shares  Student  Cooperative,  $  10  (savings)  ;  board  and 

room,  $  5 ;  from  C.  R.  Brown  for  care  of  furnace,  $  10. 

14  —  Fraternity  dues,  $  1 ;  stamps  and  paper,  50  £. 

15  —  Trip  home  for  Thanksgiving,  $  6.30 ;  photo  supplies,  $  1. 

16  —  Laundry,  75^;   barber,  50^. 

17  —  Car  fare,  20  f$ ;  board  and  room,  $  10. 

18  —  Hat,  $  3 ;  medicine,  25  £ 

19  —  Lunch,  60  i ;  bath  sponge,  50  0. 

21  —  Received  for  typewriting,  $  4.80 ;  college  annual,  $  2.50. 

22  — Fees  for  chemicals,  75^;  bay  rum,  25 £  (toilet). 

23  —  Developing  paper,  75  £ ;  Seeley's  History  of  Education,  $  1.25. 
•  24  —  Necktie,  50  j4 ;  suit  pressed,  $  1. 

25  —  Loaned  to  E.  R.  Jones  for  1  mo.,  $  10. 

26  —  Junior  Party,  $  2 ;  shoe  polish,  25  £ ;  paid  typewriter  rental,  $  3 

(fees  &  dues) ;  music  lessons,  $  5. 
28  —  Received  for  typewriting,  $  5 ;   received  for  care  of  furnace,  $  5 ; 

World's  Work,  $  1.50;  Success  Magazine,  $  1. 

Prove  the  payments.  The  sum  of  the  footings  of  the  distribution  col- 
umns must  equal  the  footing  of  the  total  column.  Prove  the  receipts 
in  the  same  manner.  Find  the  balance  and  enter  it  in  the  balance  column. 

What  per  cent  of  the  total  receipts  is  the  total  amount  received  from  home  ? 
The  amount  received  from  work  ?    The  unclassified  ?     What  per  cent  of  the 
total  payments  is  the  total  of  each  payment  column  ? 
Hand  in  your  exercise  for  approval. 


HOUSEHOLD  ACCOUNTS 


17 


OPTIONAL  EXERCISE 

Prepare  a  record  sheet,  similar  to  the  one  just  completed,  and  keep  a  record 
of  your  own  cash  receipts  and  expenditures  for  the  balance  of  the  school  year, 
and  submit  it  to  your  instructor  for  credit.  Prove  the  work  at  the  end  of  each 
page  before  forwarding  the  totals  to  the  next. 

LESSON  4 
HOUSEHOLD  ACCOUNTS 

20.  In  a  recent  experiment  in  New  York  City,  it  was  found  that,  if  a  family 
would  regularly  estimate  in  advance  the  amount  to  be  spent  per  year  for  the 
several  classes  of  expenditures  in  the  average  family,  greater  economy  and  a 
better  living  would  result. 

21.  Below  is  a  table  of  suggested  percentages  of  expenses  in  families  of  five 
members : 


AMOUNT  TO  SPEND 

TOTAL 

FOOD 

RENT 

GEN. 
EXP. 

CLOTH- 
ING 

RECREA- 
TION 

Ideal  division  J  

$100 

$25 

$20 

$15 

$15 

$25 

$2000  to  $4000  

100 

25 

20 

15 

20 

20 

$800  to  $1000    

100 

30 

20-25 

10 

15 

25-20 

$500  to  $800      

100 

45 

15-20 

10 

10 

20-15 

Under  $500  

100 

60 

15 

5 

10 

10 

22.  The  student  should  study  the  above  table  and  compare  the  results  with 
his  mother's  estimates  of  her  family  expenses. 

23.  In  the  exercise  which  follows,  it  is  assumed  that  the  family  consists  of 
the  parents  and  three  children.     The  eldest  daughter,  Coral,  has  become  inter- 
ested in  home  management  and  has  decided  to  keep  accurate  accounts  of  the 
family  income  and  expenses. 

24.  The  household  has  a  cash  allowance  of  $75  per  month  and  the  income  from 
the  garden  and  poultry.     The  total  extra  income  is  about  $200  a  year,  counting 
the  produce  used  by  the  household.     All  the  household  expenses,  clothing, 
furniture,  recreation,  etc.,  are  to  be  paid  out  of  this  income.     Thus  far  it  has 
been  possible  to  save  $10  a  month,  which  is  placed  in  the  local  savings  bank  at 
four  per  cent  compound  interest. 

1  Where  the  income  is  sufficient  to  warrant  it. 


18 


PRINCIPLES  OF  BOOKKEEPING 


PouVlru 


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7- 


Illustration  3 

25.  The  monthly  bills  should  be  filed  in  an  envelope  and  preserved  for  future 
reference.  This  is  especially  important  in  the  case  of  bills  for  furniture  and  arti- 
cles which  should  be  included  in  the  annual  inventory.  Write  the  month  and 
year  on  the  envelope  and  file  it  in  a  suitable  box  or  tray. 

WRITTEN  EXERCISE 

Directions.  If  a  ruled  sheet  is  not  provided,  rule  on  a  double  page  of 
horizontally  ruled  paper  the  form  shown  in  illustration  3,  pages  18  and  19,  and 
write  up  the  following  transactions  in  the  same  manner  as  in  lessons  1  and  3. 

TRANSACTIONS 

Nov.  1  —  Balance  on  hand,  $  35.40. 
1  —  Monthly  allowance,  $  75. 
1  —  Sugar,  $  1 ;  bacon,  $  1. 

3  —  Sold  5  doz.  eggs  to  Klines  at  35  $ ;  shoes,  $  3.50 ;  concert,  $  1. 
3  —  Hdkf .,  25  ^ ;  gift  books,  $  2.35. 
7  —  Collection,  25  0 ;  telegram,  60  i ;  meat,  50  ^ ;  butter,  80  i ;  trip  to 

Albany,  $  2 ;  hair  cut,  Eddie,  35  ^. 
7  —  Sold  potatoes,  $5;  sold  7  doz.  eggs,  $2.40;  dress,  $4;  collars  for 

Ella,  40  i;  medicine,  50^;   mittens,  50^;   salt  mackerel,  55^; 

flour,   $1.25;    gloves,    $2;    stationery,    50^    (Library);    meat 

chopper,  $  1 ;  dishes,  $  2.75. 


HOUSEHOLD  ACCOUNTS 


19 


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VlWiv 


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CWxcVx 


14 


2  3, 

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Illustration  3 

Nov.  14  —  Collection,  25  i ;  laundry,  $  1.65 ;  help,  $  3 ;  light,  $  1.20 ;  magazine 
binder,  75  i  (Library) ;  stamps,  25^  (Sundries) ;  k.  chairs,  $1.30; 
cleaning,  $  4. 

17  —  Books,  $  2.40 ;  stove  polish,  10  i ;  concert,  40  ^ ;  rubbers,  60  ^ ; 
butter,  80  i;  L.  A.  Society,  50^;  doctor,  $1. 

22  —  Sold  10  qt.  canned  raspberries,  $2.50;  trip  to  Dayton,  $1 ;  coffee, 
90 i;  roast,  75 i;  taffeta  silk,  $5.60;  waffle  iron,  $1.10;  help, 
$2.65. 

24  —  Coal,  $2.50;  cards,  60 i;  vaccination,  75^;  gasoline,  90^;  heat- 
ing stove,  $  13 ;  butter,  80^ ;  laundry,  $  1 ;  waist,  $  2.50. 

26  — Sold  10  qt.  strawberries,  $2.50;  sold  2  pullets,  80 i;  bought  fruit, 
$4.15;  steak,  40^;  sausage,  20^. 

26  —  Hat,  $  4 ;  beans,  50  i ;  telephone  rental,  $  1 ;  e.  1.  globes,  50  i ; 
stationery,  50  i ;  rocker,  $  7.50 ;  help,  $  2. 

29  — Club,  $2;  toweling,  70^;  shoes  for  G.,  $2.75;  savings  bank, 
$10;  Ella,  $1;  George,  50^;  butter,  40^;  doily  for  M., 
20  i ;  liniment,  25  i ;  fly  paper,  10  i ;  Madrid  and  return,  $  2 ; 
B.  powder,  50^;  candles,  10  i\  church  paper,  25^. 

Prove  the  work.  The  sum  of  the  totals  of  the  payment  distribution  col- 
umns must  equal  the  amount  of  the  total  column.  Prove  the  receipts  in  the 
same  manner. 


20 


PRINCIPLES  OF  BOOKKEEPING 


f 

/  2- 


Dlustration  4 

OPTIONAL  EXERCISE 

A.  Take  a  complete  inventory  of  your  mother's  household  goods,  giving  as 
nearly  accurate  prices  as  possible.     Classify  them  under  the  following  headings  : 
Furniture,  Utensils,  Library,  Clothing,  Unclassified.     Write  down  the  items 
under  each  class  on  a  separate  slip  and  then  copy  them  on  journal  paper  in  the 
form  shown  in  illustration  4. 

Ascertain  how  much  fire  insurance  your  father  is  carrying  on  the  household 
goods.  If  your  father's  house  and  the  contents  should  burn,  he  could  secure  from 
the  insurance  company  only  so  much  damage  as  he  could  prove  he  had  sus- 
tained, up  to  the  amount  stated  in  his  policy.  He  could  scarcely  be  expected 
to  remember  all  the  many  items  of  furniture  in  the  house,  therefore  this  inven- 
tory you  have  made  should  be  kept  on  file  somewhere  outside  of  your  home,  and 
in  case  of  fire  it  will  be  extremely  valuable  in  proving  the  amount  of  loss. 

B.  Ask  your  mother  for  permission  to  keep  her  accounts  for  the  next  year  on 
the  plan  outlined  in  lesson  4.     Special  credit  will  be  given  for  this  work. 


REVIEW  QUESTIONS  21 

C.  Take  an  inventory  of  all  the  supplies  and  equipment  in  your  school  or  in 
your  department.    The  instructor  will  assist  you  in  fixing  prices.    Classify  under 
the  following   headings:  Furniture;  Apparatus;  Books,   Charts,  and   Maps; 
Supplies ;  and  Miscellaneous.     Use  the  same  form  as  in  the  household  inventory. 

D.  Prepare  an  expense  record  for  the  school  with  the  same  classification  as  the 
inventory  and  such  other  additional  headings  as  the  teacher  may  suggest,  and  re- 
cord the  expenditures  for  the  school  reported  from  time  to  time  by  your  instructor. 

LESSON   5 


(The  number  of  the  question  corresponds  to  the  number  of  the  paragraph 
containing  the  answer  to  the  question.) 

1.  Name  one  important  kind  of  business  transaction. 

2.  State  two  ways  of  keeping  track  of  business  transactions  and  point  out 
the  advantage  of  each. 

3.  What  is  the  peculiar  advantage  of  written  records  of  business  transactions  ? 

4.  Define  the  term  "record"  and  illustrate.     Define  "bookkeeping." 

5.  What  are  "original  records"  and  what  is  their  peculiar  value? 

6.  Why  is  it  important  to  be  able  to  construct  special  records  and  do  proper 
ruling  ? 

7.  What  important  points  should  be  remembered  in  reference  to  stationery 
and  tools  ? 

8.  Discuss  the  importance  of  early  learning  the  correct  use  of  money. 

9.  How  are  the  comforts  we  enjoy  secured  ?     Discuss  the  importance  of 
saving. 

10.  What  are  the  fundamental  requirements  of  success  ? 

11.  What  is  the  value  of  proper  records  in  addition  to  the  results  they 
contain  ? 

13-14.  What  are  distribution  columns  and  how  are  they  used  ? 

17.  State  what  is  entered  in  the  several  columns  in  lesson  2. 

18.  Why  are  the  receipts  entered  on  the  left  and  the  payments  on  the  right  ? 
What  is  the  advantage  of  the  total  columns  ? 

25.  How  should  the  monthly  bills  be  filed  and  preserved  ? 


22 


PRINCIPLES  OF  BOOKKEEPING 


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.£_ 


/  2- 


/  7 


/  0 


/  0 


^A 


;  2- 


£_ 


£ 


/  7 


Illustration  5 

LESSON  6 
POULTRY  ACCOUNTS 

26.  The  preceding  lessons  were  devoted  entirely  to  cash  receipts  and  expen- 
ditures, since  the  object  of  private  accounts  is  merely  to  record  the  use  we  make 
of  our  money. 

27.  In  every  productive  business,  however,  it  is  very  important  to  know  at 
all  times  the  cost  of  producing  a  given  article  so  as  to  avoid  losses  and  insure 
the  permanent  success  of  the  business. 

28.  The  process  of  finding  the  exact  net  cost  of  any  article  or  service  is  called 
cost  accounting. 

29.  There  are  three  elements  which  enter  into  the  cost  of  anything  you  make, 
buy,  or  sell :  (1)  Labor,  (2)  Material,  (3)  Overhead  Charges  or  Expenses.     All 
must  be  accounted  for,  in  order  to  find  the  true  cost  of  an  article. 

30.  The  story  of  how  Clarence  Hogan  of  Portland,  Oregon,  won  $  100  in 
gold  for  excellence  in  work  connected  with  the  "Portland  Junior  Poultry  Asso- 
ciation "  should  be  interesting  to  every  boy.     In  judging  the  contest,  good  record 
keeping  was  given  20  points,  and  good  business  methods  in  marketing  was  given 


POULTRY  ACCOUNTS 


23 


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X^taxx 


Cu\  Xioxvt 


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2-7 


2-C, 


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Illustration  6 

10  points  out  of  100.     With  an  average  of  22  chickens  and  1  rooster  he  made  a 
profit  of  $62.10  and  won  $  100  besides  for  his  enterprise  and  attention  to  business. 
His  letter  to  Professor  Dryden  in  regard  to  his  work  is  so  interesting  and 
suggestive  that  it  is  given  below : 

PROFESSOR  JAMES  DRYDEN, 

Corvallis,  Oregon. 
DEAR  SIR: 

Boys  and  girls  should  raise  chickens  in  the  city  as  well  as  on  the  farm  because 
it  pays  well  and  is  a  fine  occupation.  It  is  a  work  that  never  grows  tiresome  and 
new  experiences  are  always  awaiting  you.  Various  theories  are  advocated  as 
to  the  proper  manner  of  housing  and  feeding  to  get  the  best  results,  but  simple 
rules  are  the  best  to  begin  with.  Plenty  of  clean  water,  clean  houses  and  yards, 
and  good  feed,  are  needed  to  get  the  best  results.  Spade  up  a  little  in  the  chicken 
yard  every  day  that  it  is  pleasant,  but  if  it  is  cold  and  wet  weather  provide  a 
scratching  shed.  Keep  your  hens  busy.  Read  the  bulletins  furnished  free  by 


PRINCIPLES  OF  BOOKKEEPING 


\Voc\frxvs  V 


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UccevpA 


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Covu 


Ot*3 


J 

2-0 


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Illustration  1 

the  government  and  the  various  experiment  stations.  Also  subscribe  to  a  good 
poultry  paper.  The  ideas  you  will  get  from  these,  together  with  your  own  expe- 
rience, will  make  you  a  successful  poultry  raiser.  By  doing  all  that  was  stated 
above  I  was  able  to  win  first  prize  in  the  poultry  contest  just  closed. 

Yours  truly, 

CLARENCE  A.  HOGAN. 

31.  In  the  exercise  which  follows,  the  care  of  the  chickens  is  the  labor; 
the  feed,  spraying  material,  etc.,  are  the  materials;    the  twenty-three  dollars 
Clarence  starts  with  represents  the  capital;    cleverness,  good  judgment,  and 
activity  in  starting  the  business  represent  the  enterprise. 

32.  In  finding  the  cost  of  labor,  it  was  found  that  it  required  approximately 
half  an  hour  each  day  to  conduct  the  business.     The  value  of  his  time  was  placed 
at  twenty  cents  an  hour. 

33.  Note  one  thing  in  particular.     He  has  correct  ideas  about  business. 
He  does  not  expect  anything  for  nothing.     At  the  outset  he '  borrowed  $  20 
from  his  father  at  6  per  cent  interest.     This  he  paid  promptly  when  due. 

WRITTEN  EXERCISE 

Let  us  now  examine  his  records.     Illustration  5,  page  22,  is  a  reproduction 
of  his  egg  record  and  illustration  6,  page  23,  of  his  food  record.     Illustration  7  is 


POULTRY  ACCOUNTS  25 

a  good  form  of  cash  book  and  one  you  are  already  familiar  with  from  lessons  2 
and  3.  He  kept  a  separate  set  of  books  with  his  business;  his  personal  ac- 
counts he  kept  in  a  different  book  like  the  one  used  in  lesson  2. 

By  checking  the  Egg  and  Food  records  with  the  cash  book  for  January,  you 
will  readily  understand  their  uses. 

Directions.  On  two  pages  (not  opposite)  of  practice  paper  rule  the  form 
shown  in  illustration  7.  In  this  case  allow  f  inch  for  the  cents  and  the  same  for 
the  dollars  in  the  payment  column,  and  f  in.  for  the  dollars  in  the  receipt  col- 
umn. The  "items"  and  "date"  columns  will  occupy  the  rest  of  the  space. 
No  ruling  need  be  done  if  ruled  sheets  are  provided. 

You  may  now  write  up  the  accounts  on  the  form  you  have  prepared  from  the 
following : 

TRANSACTIONS 

Oct.      30  —  Balance  on  hand,  $  3. 

30  —  Borrowed  of  father  on  my  note  at  6  per  cent,  $  20. 

31  —  Bought  22  hens  at  75 1;  1  rooster,  $2. 
Nov.     30  —  Sold  64  eggs  for  the  month  at  50  £  doz. 

30  —  Bought  149  Ib.  wheat,  $  2 ;  8  Ib.  corn,  16  i ;  4  Ib.  grit, "8  £ 
Dec.      31  —  Sold  199  eggs  for  the  month  at  55  £  doz. 

31— Bought  110  Ib.  wheat,  $1.47;  28  Ib.  corn,  56^;  5  Ib.  grit,  10 £; 
19  Ib.  bran,  25^;    25  Ib.  shorts,  44^;  hoe,  75^;   spade,  $1; 
bucket,  $  1 ;  lice  killer,  25  i. 
Jan.      31  —  Sold  378  eggs  for  the  month,  at  50  £  doz. 

31  —Bought  93  Ib.  wheat,  $1.24;   21  Ib.  corn,  42^;  26  Ib.  bran,  35 i; 

4  Ib.  grit,  8^;  26  Ib.  shorts,  46 £ 
Feb.      28  —  Sold  319  eggs  for  the  month,  at  45  i  doz. 

28  — Bought  97  Ib.  wheat,  $1.29;  25  Ib.  corn,  50^;  24  Ib.  bran,  32^; 

4  Ib.  grit,  Si;  24  Ib.  shorts,  42  £ 
Mar.     31  —  Sold  410  eggs  for  the  month,  at  30  i  doz. 

31  —  Bought  98  Ib.  wheat,  $  1.47;  31  Ib.  corn,  62^;  27  Ib.  bran, 

4  Ib.  grit,  8^;  27  Ib.  shorts,  47 £ 
Apr.      30  —  Sold  358  eggs  for  the  month,  at  25  i  doz. 

30  — Bought  73  Ib.  wheat,  $1.10;   23  Ib.  corn,  46  j£;  25  Ib.  bran, 

4  Ib.  grit,  8^;  25  Ib.  shorts,  44 £ 
30  —  Paid  father's  note,  $  20 ;  interest,  60  £ 
May     31  —  Sold  321  eggs  for  the  month,  at  25 1  doz. 


26  PRINCIPLES  OF  BOOKKEEPING 

May      31  —  Bought  81  Ib.  wheat,  $1.22;   17  Ib.  corn,  34^;  26  Ib.  bran, 

4  Ib.  grit ;  8  £ ;  26  Ib.  shorts,  46  £ 
June     30  —  Sold  308  eggs  for  the  month,  at  30  £  doz. 

30  — Bought  80  Ib.  wheat,  $1.20;   7  Ib.  corn,  14^;  25  Ib.  bran,  35^; 

4  Ib.  grit,  8^;  25  Ib.  shorts,  44^. 
July      31  —  Sold  290  eggs  for  the  month,  at  30  £  doz. 

31  — Bought  104  Ib.  wheat,  $1.56;    26  Ib.  bran,  35 1\   4  Ib.  grit,  8£; 

26  Ib.  shorts,  46  £. 
Aug.     31  —  Sold  243  eggs  for  the  month,  at  35  £  doz. 

31— Bought  95  Ib.  wheat,  $1.66;  36  Ib.  bran,  48^;  4  Ib.  grit,  8£; 

36  Ib.  shorts,  63  £ 
Sept.     30  —  Sold  144  eggs  for  the  month,  at  40^  doz. 

30  — Bought  60  Ib.  wheat,  $1.05;    34  Ib.  bran,  40^;  4  Ib.  grit,  8£; 

34  Ib.  shorts,  59  £. 
Oct.      31  —  Sold  71  eggs  for  the  month,  at  45^  doz. 

31  —  Bought  54  Ib.  wheat,  96^;  35  Ib.  bran,  42 £;  4  Ib.  grit-,  8^;  35  Ib. 

shorts,  61  £ ;  paid  rent  for  the  chicken  house,  60  £. 
Oct.      31  —  Prize,  $  100. 

Your  results  should  agree  with  the  statement  in  the  next  lesson. 

LESSON  7 
THE  FINANCIAL  STATEMENT 

DEFINITIONS 

34.  A  resource  is  anything  we  own,  such  as  cash,  land,  horses,  books,  etc., 
and  what  others  owe  us.     It  represents  something  of  value  to  us.     A  liability 
is  a  debt  which  we  owe  others. 

35.  When  a  business  transaction  costs  more  than  we  realize  from  it,  we 
sustain  a  loss.     When  we  get  more  out  of  a  business  venture  than  it  costs  us,  we 
make  a  gain. 

36.  A  resource  inventory  is  property  on  hand  or  an  amount  owing  to  the  busi- 
ness not  shown  in  the  records.     A  liability  inventory  is  an  amount  owing  by  the 
business  to  others  not  shown  in  the  records. 

37.  Depreciation  is  the  reduction  in  value  which  property  suffers  by  use  or 
otherwise. 

38.  The  net  present  worth  of  a  business  at  any  time  is  the  difference  between 
the  resources  and  the  liabilities. 


THE  FINANCIAL  STATEMENT 


27 


2- 


Illustration  8 

39.  By  grro&s  cost  is  meant  total  cost.     By  net  cost  is  meant  the  total  cost  less 
any  discounts  or  other  deductions.     In  making  articles  the  cost  of  each  article 
is  found  by  dividing  the  actual  cost  of  all  the  articles  by  the  number  produced. 

40.  A  financial  statement  is  a  summary  of  the  resources  and  liabilities  of  a 
business  at  a  given  date, and  the  losses  and  gains  for  a  given  period.     In  it  is 
sometimes  included  various  other  information  such  as  a  statement  of  cash  re- 
ceipts and  payments,  detailed  inventories,  and  the  like. 

WRITTEN  EXERCISE 


On  a  sheet  of  paper  ruled  like  illustration  8,  prepare  the  statement  given  on 
the  next  page  by  filling  in  the  blanks  from  the  cash  book  in  the  last  lesson. 


28  PRINCIPLES  OF  BOOKKEEPING 

FINANCIAL  STATEMENT  OF  CLARENCE  A.  HOGAN 

OCTOBER  31,  1915 
Inventory,  Nov.  1,  1914. 

1  rooster 
22  hens 
Cash  __ 

Total 
Due  father 

Net  worth 
Inventory,  Oct.  31,  1915. 

1  rooster 
22  hens 
Implements  (less  10  per  cent  depreciation) 

Cash  

Total 


Net  worth  now 
Net  worth  last  year 

Total  gain 

Prize 

Gross  gain  on  chickens 

Less  labor  for  365  days,  10  £  a  day 

Net  gain  for  enterprise 
Total  number  eggs  sold,  3105,  or  258  f  doz. 
Total  cost : 

Cash 

Labor  

Total 
Net  cost  per  dozen  is  "  total  cost "  -f-  "  total  no.  doz." 


REVIEW  QUESTIONS  29 

LESSON  8 

REVIEW   QUESTIONS 

ON  LESSONS  6  AND  7 

26.  To  what  kind  of  transactions  are  private  accounts  limited  ? 

27.  What  special  kind  of  records  are  important  in  a  productive  business  ? 

28.  Define  cost  accounting. 

29.  What  elements  enter  into  the  cost  of  an  article  ? 

31.  In  a  poultry  business,  what  corresponds  to  these  elements  ? 

32.  Do  you  regard  the  pay  allowed  Clarence  as  satisfactory  ?    How  much 
would  this  be  a  month  ? 

33.  What  important  lessons  did  you  learn  in  paragraph  33  ? 

33.  What  special  lesson  can  you  learn  from  Clarence's  financial  methods  ? 

34.  Define  a  resource ;  a  liability. 

35.  Define  a  loss ;  a  gain. 

36.  What  is  a  resource  inventory  ?    A  liability  inventory  ? 

37.  Define  depreciation. 

38.  Define  the  net  worth  of  a  business. 

39.  Explain  how  to  find  the  cost  of  an  article. 

40.  Define  a  financial  statement  and  tell  what  it  contains. 


30 


PRINCIPLES  OF  BOOKKEEPING 


LESSON  9 


41.  In  any  business,  things  are  bought  to  be  sold.     All  such  things  are  called 
merchandise. 

42.  Merchandise  may  be  paid  for  at  the  time  it  is  received,  or  a  promise  of 
future  payment  may  be  given  if  both  buyer  and  seller  agree  to  this  method  of 
settlement.     Money  and  all  kinds  of  written  promises  or  orders  which  may  be 
promptly  exchanged  for  money  at  their  full  or  face  value,  are  called  cash  in  book- 
keeping.    A  post-office  money  order,  an  express  money  order,  and  a  check  are 
some  of  the  more  common  forms  of  cash. 

43.  When  merchandise  is  bought  on  a  promise  of  future  payment,  it  is  said 
to  be  purchased  on  credit.     The  promise  of  future  payment  may  be  either  oral, 
or  written  in  the  form  of  a  promissory  note. 


~t^s^f^?s-e. 


stst/-?. 


C^h^/ 


J~<?  c 


/  2-rt 


/a  0 


~A^L^ 


A£22 


1  3  a 


2-  a* 


2-<y0 


2-o  a 


Illustration  9 

WRITTEN  EXERCISE 

Directions.  Draw  a  line  vertically  through  the  middle  of  an  ordinary  sheet 
of  horizontally  ruled  paper.  In  beginning  business  you  would  find  it  necessary 
to  buy  merchandise  before  you  could  sell  any.  In  writing  your  records  you  would 
naturally  begin  on  the  left-hand  side  of  the  sheet.  Therefore,  you  would  naturally 
write  the  record  of  your  purchases  on  the  left  side  of  the  dividing  line,  and  later, 
when  you  sell  this  merchandise,  you  would  complete  the  lines,  writing  on  the 
right  side  of  the  vertical  line.  The  name  debit  has  been  given  to  the  records  on 
the  left  side  and  the  name  credit  to  those  on  the  right  side. 


DEBITS  AND  CREDITS 


31 


,  /f  /J 


Illustration  9b 

Enter  the  following  transactions  on  the  sheet  you  have  prepared  as  shown  in 
illustration  9,  page  30,  observing  the  directions  regarding  left  and  right  sides  of 
your  page. 

1.  Bought  500  bu.  wheat  at  $  1  and  paid  cash. 

2.  Sold  100  bu.  wheat  at  $  1.20  and  received  cash. 

3.  Bought  50  bu.  beans  at  $  3  and  paid  cash. 

4.  Sold  30  bu.  beans  at  $  3.50  and  received  cash. 

5.  Bought  200  bu.  millet  at  $  1  and  paid  cash. 

6.  Sold  100  bu.  millet  at  $  1.30  and  received  cash. 

7.  Sold  200  bu.  wheat  at  $  1.25  and  received  cash. 

8.  Bought  60  bu.  beans  at  $  3  and  paid  cash. 

9.  Sold  40  bu.  beans  at  $  3.50  and  received  cash. 
10.  Bought  for  cash  200  bu.  oats  at  65^. 

44.  From  this  exercise  it  will  be  seen  that  all  things  that  come  into  the  busi- 
ness are  debited  and  all  things  that  go  out  of  the  business  are  credited.    This  is  the 
only  rule  that  need  be  remembered  in  connection  with  this  class  of  transactions. 

45.  An  account  is  a  collection  of  debits  and  credits  arranged  under  an 
appropriate  name.     For  example :  cash  account  as  it  was  written  up  in  the  pre- 


32  PRINCIPLES  OF  BOOKKEEPING 

ceding  lessons.     All  cash  received  was  placed  on  the  left  side  and  all  cash  paid 
out  was  entered  on  the  right  side. 

THE  PRINCIPLES  OF  DOUBLE  ENTRY 

46.  There  are  two  general  methods  of  keeping  accounts.     Single  entry,  by 
which  are  kept  accounts  with  persons  only.     Double  entry,  by  which  are  kept 
accounts,  not  only  with  persons,  but  with  property  and  allowances. 

47.  Double  entry  is  greatly  superior  to  single  entry ;  first,  because  it  enables 
us  to  detect  many  errors  in  our  work  which  could  not  be  found  readily  by  single 
entry;  and,  second,  it  enables  us  completely  to  analyze  our  profits  and  losses 
with  reference  to  their  sources. 

48.  You  have  unconsciously  used  double  entry  in  the  exercises  you  have 
already  written  up.    You  will  remember  that  every  payment  in  the  private 
cash  accounts  was  entered  in  both  the  "total"  and  the  distribution  columns. 
There  never  was  any  exception  to  this.     Cash  was  credited  for  the  payment 
and  one  or  more  of  the  distribution  columns  was  debited.     You  will  remember 
that  we  could  balance  our  cash  on  every  page  or  at  the  end  of  every  month. 
The  footing  of  the  "total"  column    equaled  the  sum  of  the  footings  of  the 
distribution  columns.     The  same  was  true  of  the  cash  receipts.     This  was  truly 
double  entry  though  restricted  to  cash  and  impersonal  transactions.     In  order 
to  master  the  art  of  double  entry,  we  must  now  study  its  principles  and,  in  several 
exercises,  learn  how  to  apply  them. 

49.  In  the  double-entry  system  of  bookkeeping  there  is  a  debit  for  every 
credit  and  vice  versa.    This  is  on  the  theory  that  every  transaction  involves  an 
exchange  which  must  eventually  result  in  an  income  and  a  corresponding  outlay, 
or  several  incomes  and  several  outlays. 

50.  The  account  is  the  basis  of  all  bookkeeping  and  to  their  proper  accounts 
all  entries  are  destined.     The  only  book  that  is  absolutely  essential  to  double 
entry  is  one  arranged  for  classified  accounts.     Others  are  used,  however,  for 
convenience.     We  have  seen  that  the  forms  in  lessons  2  and  4  answer  this  pur- 
pose to  a  limited  degree  by  using  the  columns  as  accounts. 

51.  The  ledger  is  the  book  of  accounts,  while  other  books  are  books  of 
original  entry.     The  usual  form  is  shown  in  illustration  11,  page  41. 

52.  The  left  side  of  the  ledger  is  called  the  debit,  and  the  right,  the  credit 
side. 

53.  04)  When  a  person  takes  something  from  the  business  without  giving 


DEBITS  AND  CREDITS 


33 


some  material  thing  in  return  his  account  is  debited  or  charged.  When  the  busi- 
ness receives  something  from  a  person  without  giving  any  material  thing  in 
exchange,  the  person's  account  is  credited. 

(B)  When  something  comes  into  the  business  an  appropriate  impersonal 
account  is  debited.  When  something  goes  out  of  the  business  an  appropriate 
impersonal  account  is  credited.  For  example,  when  money  or  its  equivalent 
is  received,  cash  account  is  debited.  When  money  or  its  equivalent  is  parted 
with,  cash  account  is  credited. 

ILLUSTRATIVE  EXAMPLES 

On  January  1,  191-,  Clarence  Hogan,  being  a  thrifty  young  man,  is  alert  for 
a  chance  to  make  a  profit  with  his  savings.  We  have  seen  that  he  is  also  method- 
ical and  accurate  in  his  business.  We  find  the  following  memoranda  in  his 
notebook. 

TRANSACTIONS 

"Jan.  1.  I  have  on  hand  $  125  and  I  have  decided  to  buy  a  certain  horse 
for  $  100,  because  my  father  thinks  he  will  soon  be  worth  much  more. 

"  Jan.  4.  Bought  a  bay  four-year-old  colt,  Jim,  of  Robert  Williams  for 
$  100  cash. 

"  Jan.  5.     Bought  feed  for  $  5  cash. 

"  Jan.  20.     Sold  Jim  for  $  150  cash." 

He  wishes  to  find  out  the  result  of  his  venture  and  to  put  the  story  of  his 
transactions  in  a  little  more  systematic  form.  He  opens  a  cash  account  as 
follows : 

CASH 
DEBIT        (RECEIVED)  (PAID)  CREDIT 


Jan. 

1 

On  hand 

125 

Jan. 

4 

For  Jim 

100 

20 

For  Jim 

150 

5 

For  feed 

5 

Balance 

170 

275 

275 

This  cash  account  is  not  satisfactory  to  Clarence.  What  he  wants  to  know, 
besides  his  cash  record,  is  how  much  he  made  on  the  horse  deal,  and  how  he  made 
it.  He,  therefore,  decides  to  analyze  his  whole  venture.  In  this  he  is  assisted 
by  his  teacher.  His  instructor  explains  each  transaction,  step  by  step,  as  follows : 


34 


PRINCIPLES  OF  BOOKKEEPING 


Jan.  1.  "There  are  two  accounts  involved  in  this  transaction:  cash  and 
yourself.  So  one  is  opened  with  the  title  'Cash'  and  another,  'Proprietor/ 
as  follows : 

PROPRIETOR 
DEBIT  CREDIT 


Jan. 

1 

Investment 

125 

DEBIT        (RECEIVED) 


CASH 


(PAID) 


CREDIT 


Jan. 

1 
20 

On  hand 
For  Jim 

125 
150 

Jan. 

4 
5 

Paid  for  Jim 
Paid  for  feed 

100 
5 

"  (1)  Note  that  we  record  things  or  promises  that  come  to  the  business  on  the 
left,  or  debit,  side. 

"  (2)  We  record  things  or  promises  that  go  from  the  business  on  the  right, 
or  credit,  side. 

"This  is  merely  a  convenient  custom  growing  out  of  the  method  of  recording 
business  transactions  illustrated  in  lesson  9.  In  this  transaction  cash  is  a  thing 
coming  into  the  business  and  is,  therefore,  debited.  The  business  is  obligated 
or  expected  to  repay  the  Proprietor  (yourself)  the  investment  you  put  into  it, 
and,  therefore,  the  Proprietor's  account  is  credited." 

"Remember  that  in  double-entry  bookkeeping  the  business  is  an  imper- 
sonal idea  entirely  apart  from  the  owners. 

We  now  come  to  the  second  transaction. 

Jan.  4-  "  Here,  again,  we  have  two  accounts :  the  horse  which  comes  into 
the  business  is,  therefore,  debited  (1) ;  and  the  cash  which  goes  out  is,  there- 
fore, credited  (2).  We  therefore  open  another  account. 


HORSE 


DEBIT 


(COST) 


(RETURNS)         CREDIT 


Jan. 

4 
5 

Cost 
Feed 

100 
5 

Jan. 

20 

Sold  for 

150 

Jan.  5.  "Here,  also,  we  have  two  accounts  :  'Feed'  comes  into  the  business 
and  is,  therefore,  debited  (1)  (but  since  it  is  consumed  by  the  horse,  we  debit  the 
horse  with  it) ;  and  cash  goes  out  and  is,  therefore,  credited  (2). 


DEBITS  AND  CREDITS  35 

Jan.  20.  "  Here  once  more  we  have  two  accounts :  Cash  coming  in  is  debited 
(1) ;  Horse  going  out  is  credited  (2).  This  completes  the  records.  By  turning  to 
the  Horse  account  we  find  that  the  returns,  or  credit,  side  is  $  45  larger  than  the 
cost,  or  debit,  side.  The  net  result  of  the  transaction  is,  therefore,  a  gain  of  $  45." 

SUMMARY  OF  PRINCIPLES 

54.  We  have  now  reached  a  point  where  we  can  summarize  the  rules  for 
determining  the  debits  and  credits  in  business  transactions. 

The  Proprietor 

(1)  Debit  the  proprietor  for  all  withdrawals  for  personal  use  and  for  the  net 
loss  of  the  business. 

(2)  Credit  the  proprietor  for  his  investments  and  for  the  net  gain. 
Property 

(3)  Debit  property  that  comes  into  the  business. 

(4)  Credit  property  that  goes  out  of  the  business. 
Persons 

(5)  Debit  persons  when  they  receive  something  from  our  business  without 
giving  us  some  material  thing,  such  as  a  note  or  money,  in  return. 

(6)  Credit  persons  when  they  give  us  something  without  receiving  some 
material  thing  in  return. 

Allowances 

(7)  Debit  allowances  made  by  the  business  to  others. 

(8)  Credit  allowances  made  to  the  business  by  others. 

THE  LAW  OF  DEBIT  AND  CREDIT 

55.  Rules  1  to  8  may  be  stated  as  a  general  law  as  follows : 
Debit  that  for  which  we  exchange  something  of  value. 
Credit  that  for  which  we  get  something  of  value  in  exchange. 


36  PRINCIPLES  OF  BOOKKEEPING 


56.  The  object  of  this  set  is  to  illustrate  the  principles  of  debits  and  credits, 
as  stated  in  paragraphs  41  to  55,  and  other  bookkeeping  processes  such  as  post- 
ing, taking  trial  balance,  making  balance  sheet,  and  closing  the  ledger.     The 
simplest  figures  have  been  used,  the  object  being  to  illustrate  bookkeeping  and 
not  commercial  arithmetic. 

57.  Remember  that  while  in  itself  the  form  may  often  be  of  little  value,  it  is 
of  the  greatest  importance  in  the  early  stages  of  your  study.     The  form  used 
in  the  model  has  been  approved  by  the  best  accountants  for  centuries.     The 
student  should,  therefore,  give  it  the  closest  attention. 

58.  In  recording  a  business  transaction,  it  is  of  the  utmost  importance  that 
all  the  essential  facts  of  the  transaction  be  recorded  and  that  the  statement  be 
sufficiently  detailed  so  as  to  admit  of  no  misunderstanding  of  its  meaning. 

59.  In  actual  business,  where  transactions  are  numerous,  it  is  customary  to 
classify  them  in  four  books  of  original  entries,  the  cash  book,  sales  book,  pur- 
chase book,  and  journal,  as  illustrated  in  lesson  55,  but  the  principles  of  debit 
and  credit  are  most  readily  understood  by  using  only  the  journal-daybook,  and 
therefore  only  this  book  will  be  used  in  this  set.     It  is  conveniently  ruled  for 
indicating  the  debits  and  credits  that  are  necessary  in  recording  business 
transactions.     Proper  space  is  allowed  for  amounts  and  explanations. 

WRITTEN  EXERCISES 

(A)  You   will  now  copy   the    model    journal,    illustration    10,   pages   38, 
39,  and  40.     Four  pages  of  journal  paper  will  be  required.     Note  that  the  totals 
of  the  money  columns  are  equal  at  all  times.     Number  the  pages  from  1  to  4. 
On  a  separate  sheet  write  the  reason  for  every  entry,  as  shown  in  the  illustra- 
tive examples,  pages  33,  34,  35.     Credit  will  not  be  given  for  this  lesson  unless 
this  is  done.     Having  copied  the  journal  hand  it  to  your  teacher  for  approval. 

(B)  Using  the  form  illustrated  in  the  model  journal,  make  the  proper  journal 
entries  for  the  ten  transactions  in  lesson  9,  page  31. 

(C)  You  will  now  copy  the  model  ledger,  illustration  11,  pages  41,  42,  and 
43,   omitting  the  arrow  pointed  lines.     You  will   use  four  pages  of  paper. 
Number  the  pages.     Give  one  third  of  the  page  to  each  account.     Write  the 


MODEL  SET  37 

titles  in  a  clear,  large  hand.  You  will  do  all  the  horizontal  ruling  in  red  ink. 
Observe  that  the  single  line  extends  only  through  the  money  column,  while  the 
double  line  extends  through  all  except  the  items  columns.  Rule  directly  on 
the  blue  line  and  note  in  accounts  2  and  3  that  the  ruling  is  done  on  the  same 
blue  line  on  both  sides  of  the  account,  even  if  the  number  of  entries  are 
unequal. 

(D)  You  will  now  copy  the  trial  balance  and  statements.     You  will  need 
two  pages  of  journal  paper,  arranged  the  same  as  the  model,  illustration  12, 
pages  44  and  45.     Only  one  form  of  trial  balance  should  be  used.     By  taking 
all  the  totals,  as  shown  in  the  first  two  columns,  their  sum  will  equal  the  total 
of  the  journal  columns.     If  only  one  side  agrees  with  the  journal,  it  is  known 
that  the  other  is  wrong  and  must  be  checked  to  find  the  error.     It  is  best, 
therefore,  to  use  totals  instead  of  balances. 

(E)  Having  copied  the  entire  model,  you  will  now  trace  every  entry  from  the 
journal  to  the  ledger,  from  the  ledger  to  the  trial  balance,  and  from  the  trial 
balance  to  the  statement.     Feb.  1,  2,  and  4  are  traced  by  connecting  lines  in  the 
first  three  accounts  in  the  ledger.     You  have  now  noticed  that  every  entry  in 
the  journal  is  found  under  the  corresponding  account  in  the  ledger,  that  the 
sum  of  the  journal  entries  equals  the  sum  of  the  ledger  entries  and  that  the  two 
sides  are  equal.     Hence  the  term  "  double  entry." 


38 


PRINCIPLES  OF  BOOKKEEPING 


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REVIEW  QUESTIONS 


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LESSON   11 
REVIEW    QUESTIONS 
ON  LESSONS  9  AND  10 

41.  What  is  meant  by  the  term  "merchandise"  ? 

42.  What  is  meant  by  the  term  "cash"  ? 

43.  What  is  meant  by  buying  "on  credit"  ?     "On  account"  ? 

45.  What  is  meant  by  an  account  ? 

46.  What  are  the  two  general  methods  of  keeping  accounts  ?     Define  each. 

47.  Why  is  double  entry  superior  to  single  entry  ? 

48.  Discuss  why  lessons  1,  2,  and  3  deal  with  double  entry. 

49.  State  the  theory  of  double  entry. 

50.  What  is  the  basis  of  all  bookkeeping  ? 

51.  Define  a  ledger. 

52.  What  is  the  meaning  of  the  words  "debit"  and  "credit"  ? 

53.  What  does  it  mean  to  debit  an  impersonal  account  ? 

54.  State  the  rule  for  debiting  and  crediting  the  proprietor. 
54.  State  the  rule  for  debiting  and  crediting  property. 

54.  State  the  rule  for  debiting  and  crediting  persons. 

54.  State  the  rule  for  debiting  and  crediting  allowances. 

55.  Give  the  general  law  of  debits  and  credits. 

57.  Why  is  it  important  to  observe  the  correct  form  of  entries  ? 

58.  Discuss  the  importance  of  complete  entries. 

59.  What  record  book  was  used  in  this  set  ? 


46  PRINCIPLES  OF  BOOKKEEPING 

LESSON    12 

LIVE    STOCK   SET  —  JOURNALIZING 

60.  The  object  of  this  set  is  to  familiarize  the  student  with  the  principles 
laid  down  in  the  last  two  lessons,  and  also  to  introduce  accounts  with  persons  and 
expense.     The  same  blanks  will  be  used  as  in  the  model  set. 

61.  Journalizing  is  deciding  upon  and  arranging  debits  and  credits  in  a 
convenient  form  for  posting. 

62.  An  entry  is  a  record  of  a  business  transaction,  with  particulars  and  items, 
in  the  journal  or  some  other  book  of  original  entry.     This  should  not  be  con- 
fused with  the  account.     See  paragraph  45. 

63.  A  simple  journal  entry  is  one  in  which  there  is  only  one  debit  and  one 
credit,  as 

Cash  $50 

Mdse.  $  50 

64.  A  compound  journal  entry  is  one  in  which  there  is  one  debit  and  more 
than  one  credit ;  or  one  credit  and  more  than  one  debit ;  or  several  debits  and 
several  credits,  as 

Mdse.  $  50 

Cash  $25 

Jones  &  Co.  $  25 

or, 

Cash  $  100 

Henry  Brown  $  105 

Mdse.  $205 

or 

Mdse.  $  200 

Expense  $  100 

Cash  $  120 

Bills  Payable  $  180 

65.  Errors  in  amounts  which  have  not  been  included  in  totals,  or  which,  if 
corrected,  would  not  change  other  figures  should  be  corrected  by  drawing  a  red 
line  through  the  incorrect  amount  and  substituting  the  correct  amount.     See 


JOURNALIZING  47 

account  at  top  of  page  43.  Whenever  the  correction  would  involve  other 
changes,  it  should  be  made  by  means  of  a  journal  entry.  Thus  if  Merchandise 
is  charged  for  stationery  which  was  used  in  the  office,  the  proper  entry  would 
be  Stationery  to  Mdse.,  crediting  Mdse.,  for  what  was  incorrectly  debited  to 
it.  A  full  explanation  should  accompany  each  correction.  Never  erase. 

WRITTEN  EXERCISE 

You  will  now  journalize  the  following  transactions  in  exactly  the  same 
manner  as  in  the  model  set.  Two  pages  of  journal  paper  will  be  required. 
Remember  that  the  debits  are  written  at  the  left  side  (next  to  the  red  line)  and 
the  credits  a  little  to  the  right  (ending  at  the  blue  line).  Place  the  first  date 
(month,  day,  and  year)  at  the  top  of  the  page,  and  the  other  dates  (day  only) 
in  the  center  of  the  explanation  column  and  leave  a  blank  line  after  each  entry. 
Study  the  principles  involved  in  every  entry.  The  total  of  each  column  is  $  963. 
When  completed,  hand  in  your  work  for  approval. 

February  1,  19 — .  Clarence  Hogan  has  decided  to  invest  his  entire  capital, 
$  170,  in  two  horses  and  two  cows  and  begin  the  live  stock  business.  He  is 
advised  to  continue  the  same  method  of  bookkeeping  as  was  used  in  the  last  two 
lessons  except  that,  owing  to  the  greater  number  of  transactions,  he  is  advised 
to  decide  upon  the  debits  and  credits  before  posting.  He  writes  the  titles  to 
be  debited  and  credited,  and  the  respective  amounts,  immediately  below  the 
memorandum.  This  art  of  deciding  upon  the  debits  and  credits  is  called 
journalizing. 

Debit  Cash  and  credit  Proprietor.  See  paragraph  54,  principles  3  and  2. 
Use  exactly  the  same  form  of  journal  as  in  illustration  10,  page  38. 

3.    Bought  of  Edwin  Brown  a  two-year-old  colt,  "Ned,"  for  cash,  $  75. 

5.  Bought  of  W.  E.  Morrison  a  four-year-old  horse  "Prince"  for  $  125,  pay- 
able in  15  days. 

8.  Bought  a  three-year-old  cow  of  Isaac  Thompson  for  $  40  cash. 

9.  Bought  a  four-year-old  cow  of  E.  B.  Smith,  payable  in  20  days,  $50. 

12.  Bought  hay  and  feed  for  $  15  cash.  (Anticipating  that  we  may  have 
expenses  which  cannot  be  charged  directly  either  to  the  Horses  or  the  Cows,  we 
open  an  account  with  Expense.) 

14.  Bought  a  halter  for  cash,  $  2.     Debit  Expense  and  credit  Cash.     Why  ? 

15.  Paid  for  stable  hire,  $  1.00.     Make  the  proper  journal  entry. 
17.   Sold  both  horses  to  Empire  Livery  Co.  for  cash,  $  250. 


48  PRINCIPLES  OF  BOOKKEEPING 

18.    Sold  both  cows  to  E.  L.  Ford  on  account,  payable  in  30  days,  for  $  110. 
20.    Paid  W.  E.  Morrison  for  the  horse  bought  Feb.  5  in  cash,  $  125. 

LESSON   13 
LIVE   STOCK  SET  — POSTING 

66.  Posting  is  transferring  the  debits  and  credits  from  books  of  original 
entry  into  the  ledger,  and  properly  classifying  them. 

67.  Indicating  the  pages  to  which  or  from  which  posting  is  done,  is  very  im- 
portant, since  it  is  often  necessary  to  refer  from  one  book  to  another.     It  is 
especially  important  in  checking,  as  it  saves  the  time  wasted  in  hunting  pages 
through  an  index.     It  also  indicates  at  a  glance  whether  or  not  the  posting 
has  been  done.     Note  that,  there  is  to  be  a  page  or  account  number  opposite 
every  debit  and  credit  in  the  journal,  indicating  where  the  amount  is  found  in  the 
ledger ;  and  in  the  ledger  folio  column  there  is  to  be  a  journal  page  number  oppo- 
site every  amount,  indicating  from  what  page  of  the  journal  the  amount  was 
taken. 

68.  The  ledger  accounts  frequently  become  very  numerous  and  it  is,  there- 
fore, important  that  the  accounts  be  properly  indexed.     References  are  made 
either  to  the  page  or  account  number.     Study  the  manner  of  indexing  names  in 
your  telephone  directory. 

WRITTEN  EXERCISE 

You  will  now  post  the  journal  entries  into  the  ledger.  Three  pages  of  ledger 
paper  will  be  required.  (1)  Number  the  pages  as  usual.  (2)  At  the  top  of 
page  1,  on  the  blue  line,  write  Clarence  Hogan;  8  lines  below,  write  Cash;  and 
12  lines  below,  Horses.  Give  one  third  page  to  each  of  the  following  accounts  : 
Page  2,  Cows,  Expense,  W.  E.  Morrison;  page  3,  E.  B.  Smith,  E.  L.  Ford 
and  Loss  and  Gain.  (3)  Post  all  the  debits.  Under  Cash,  on  the  left  side, 
write 

19- 

Feb.l  1  170 

and  mark  the  ledger  page  1  opposite  cash  in  the  journal.     Next  under  Horses 
write 

19— 

Feb.l  1  75 


TRIAL  BALANCE  AND  BALANCE  SHEET  49 

and  also  mark  the  ledger  page.  Proceed  in  the  same  manner  until  all  the  debits 
are  posted.  Now  add  the  amounts  in  the  ledger  and  see  if  the  total  is  $  963, 
the  same  as  in  the  journal. 

(4)  Proceed  to  post  the  credits  in  the  same  manner  and  test  the  totals.  You 
have  22  amounts  in  the  journal ;  you  should  have  22  ledger  page  numbers  in  the 
margin. 

LESSON   14 

LIVE    STOCK    SET  — TRIAL  BALANCE  AND  BALANCE  SHEET 
A.  The  Trial  Balance. 

69.  The  trial  balance  is  a  list  of  all  open  accounts  with  the  total  of  the  debits 
and  credits  of  each  placed  opposite  the  name  of  each  account ;    or  the  balance  of 
each  account  may  be  found  and  placed  in  the  left  or  right  money  column  accord- 
ing as  it  is  a  debit  or  credit  balance.     In  either  case  the  two  sides  must  be  equal. 

70.  The  trial  balance  proves  only  that  the  two  sides  of  the  ledger  are  equal. 
It  does  not  show  errors  in  posting  that  do  not  affect  the  equality  of  the  debits  and 
credits.     For  example,  if  we  charged  Jones  and  credited  Stock  with  $  100,  when 
it  should  have  been  $  125,  or  if  we  charged  Brown  instead  of  Smith,  the  trial 
balance  would  not  show  the  error. 

71.  If  the  two  sides  of  a  trial  balance  are  not  equal,  it  is  generally  a  waste  of 
time  to  try  short  cuts  to  find  the  error.     The  best  way  usually  is  to  check  the 
work  in  the  following  order :  (1)  The  totals  of  the  trial  balance ;  (2)  the  transfers 
from  the  ledger  to  the  trial  balance ;  (3)  the  totals  in  the  ledger ;  and  (4)  the  post- 
ing from  the  books  of  original  entry  into  the  ledger.     Care  should  be  taken 
actually  to  place  a  check  mark  (vO  opposite  each  correct  entry  so  as  to  avoid 
repetition  or  omission.     Many  bookkeepers  check  before  taking  a  trial  balance. 

72.  The  proprietor's  account  shows,  on  the  debit  side,  the  withdrawals  from 
the  business,  and  losses,  if  any ;  on  the  credit  side,  the  original  investment,  sub- 
sequent investments,  and  the  net  gain,  if  any.     After  the  account  is  ruled,  it 
shows,  on  the  credit  side,  the  present  worth. 

73.  The  debit  side  of  the  cash  account  is  nearly  always  the  larger. 

74.  Accounts  with  property  usually  show  a  balance,  if  any,  on  the  debit  side. 

75.  Expense  account  represents  purchases  of  things,  service,  etc.,  necessary 
to  carry  on  the  business,  and  therefore  will  be  debited  for  such  expenditures. 
Occasionally  expense  items  are  sold,  or  for  some  reason  an  expense  outlay  is  re- 
turned in  whole  or  in  part.     In  such  cases  the  expense  account  is  credited  for 
the  amounts  expended. 


50  PRINCIPLES  OF  BOOKKEEPING 

76.  Accounts  with  persons  show  a  balance  on  the  debit  side,  if  they  owe  the 
business ;  on  the  credit  side,  if  the  business  owes  them. 

WRITTEN  EXERCISE  A 

(^4)  Total  all  the  ledger  columns  having  two  or  more  entries,  leaving  light 
pencil  totals,  as  shown  in  the  model.  Find  the  balance  of  each  account.  This 
may  be  done  in  pencil  on  the  larger  side  of  the  account,  as  shown  in  the  model. 
Do  not  erase  the  pencil  figures,  as  they  may  be  of  assistance  in  detecting  errors. 

(B~)  On  a  sheet  of  scratch  paper  make  a  trial  balance  of  your  ledger. 

W.  E.  Morrison's  account  is  not  included  because  both  sides  are  equal. 
Follow  as  your  model  illustration  12,  page  44.  The  totals  of  both  sides  should 
be  $290. 

(O)  Having  completed  the  rough  balance,  copy  it  on  a  page  of  journal  paper. 
B.  The  Balance  Sheet. 

77.  The  balance  sheet  is  a  condensed  statement  of  the  condition  of  a  business 
at  a  given  date  and  the  results  of  operations  for  a  given  period.     It  should 
exhibit  (1)  A  statement  of  the  resources  and  liabilities ;    (2)  an  analysis  of  the 
losses  and  the  gains ;  and,  finally,  (3)  the  present  worth  of  the  business. 

78.  The  net  worth  of  a  business  is  the  difference  between  the  total  resources 
and  the  total  liabilities. 

79.  There  are  two  ways  of  finding  the  present  worth  of  a  business :   (1)  by 
taking  the  difference  between  the  resources  and  the  liabilities ;  (2)  by  adding  the 
net  gain  to  the  proprietor's  net  credit.     If  the  two  results  are  equal,  the  balance 
sheet  is  generally  considered  correct. 

80.  An  account  shows  a  resource  if  it  represents  property  on  hand  or  an 
amount  due  the  business;   a  liability  if  it  represents  an  amount  owing  by  the 
business. 

81.  An  account  shows  a  loss  if  it  has  cost  us  more  than  it  has  produced; 
a  gain  if  it  has  produced  more  than  it  has  cost. 

82.  The  cash  account  ordinarily  shows  a  resource.     It  would  show  a  liability 
only  when  an  overdraft  at  the  bank  exceeds  the  money  on  hand. 

83.  In  making  a  trial  balance  the  cash  book,  if  used,  will  be  considered  the 
cash  account,  and  the  balance  will  be  obtained  from  this  source  instead  of  from 
the  ledger. 

84.  An  account  with  a  person  shows  a  resource  when  the  debit  side  is  larger 
than  the  credit  side ;  a  liability  when  the  credit  side  is  the  larger. 


CLOSING  THE  LEDGER  51 

WRITTEN  EXERCISE   B 

(^4)  On  a  sheet  of  scratch  paper  write  the  heading  Resources  and  Liabilities, 
Feb.  28,  19 — ;  and  on  another  Losses  and  Gains,  Feb.  28,  19 — . 

(B)  Take  the  trial  balance  and  begin  with  the  Cash  account  (Hogan's  ac- 
count, being  the  proprietor's,  will  be  considered  last).  Since  the  balance  $  162 
represents  property  on  hand,  it  is  a  resource  (34),  hence  you  write  it  under  the 
Resource  and  Liability  heading.  Next  take  the  Horses  account.  Since  you 
have  no  property  left  under  the  account  and  the  credit  side  is  the  larger,  it  shows 
that  the  account  represents  a  gain  (35),  hence  you  write  it  under  the  Loss  and 
Gain  heading.  Thus  you  find  that  the  Horses,  Cows,  and  Expense  accounts 
fall  under  Loss  and  Gain.  Smith's  and  Ford's  accounts  fall  under  Resources 
and  Liabilities.  The  net  gain  is  $  52.  The  present  worth  is  Hogan's  credit, 
$  170  plus  $  52,  or  $  222 ;  and  this,  added  to  the  credit  side  of  the  Resources 
and  Liabilities  account,  makes  the  two  sides  equal,  which  proves  the  work. 
Reference  figures  of  ledger  pages  or  account  numbers  should  be  given  in  the 
statement  opposite  every  account.  See  illustration  12,  page  44.  When  you 
have  checked  your  work  and  found  it  correct,  you  will  copy  it  in  ink  on  a 
page  of  journal  paper. 

LESSON   15 
LIVE  STOCK  SET  — CLOSING  THE  LEDGER 

85.  The  object  of  closing  the  ledger  is  to  balance  the  loss  and  gain  accounts 
and  to  bring  the  final  net  gain  or  net  loss  into  the  proprietor's  account,  and  thus 
clear  the  way  for  the  entries  for  the  next  fiscal  period. 

86.  By  closing  an  account  is  meant  canceling  equal  amounts  on  both  sides 
and  bringing  down  the  balance,  either  below  the  ruling  on  the  larger  side  of  the 
same  account  or  into  a  summary  account,  such  as  Loss  and  Gain.     See  the 
model. 

87.  Before  closing  the  ledger,  the  following  steps  must  always  be  completed, 
as  shown  in  lessons  13  and  14. 

1.  The  ledger  must  be  completely  posted  and  checked. 

2.  The  trial  balance  must  be  taken  off. 

3.  The  balance  sheet  must  be  made. 

These  steps  must  be  taken  in  the  order  indicated. 


52  PRINCIPLES  OF  BOOKKEEPING 

88.  All  the  loss  and  gain  accounts  represented  in  the  statement  must  be 
closed ;   the  resource  and  liability  accounts  may  be  closed.     The  balance  sheet 
serves  as  a  guide  in  closing  the  ledger. 

89.  The  significance  of  double  ruling  in  the  money  column  of  a  ledger  account 
is  that  the  amounts  above  the  ruling  on  both  sides  of  the  account  are  equal,  and 
that  the  account  above  the  ruling  is  closed. 

90.  The  significance  of  redrink  entries  is  that  they  are  temporary  and  in- 
serted only  for  the  purpose  of  balancing.     Unless  the  ledger  is  permanently 
closed,  the  red-ink  entry  will  always  be  found  either  below  the  ruling  or  in  some 
other  account  on  the  opposite  side  in  black  ink. 

91.  The  proprietor's  account  is  closed  by  crediting  it  with  the  net  gain  or 
debiting  it  with  the  net  loss  and  bringing  down  the  balance  in  one  amount, 
under  the  credit  side,  as  the  present  worth. 

92.  An  account  with  a  person  having  several  items  on  both  sides  should  be 
balanced,  as  shown  in  the  model.     No  such  account  occurs  in  this  set. 

93.  An  account  with  a  person  having  one  item  only  should  not  be  closed. 
Example,  E.  B.  Smith  in  this  lesson. 

94.  An  account  with  a  person  having  only  one  debit  and  one  equal  credit  is 
closed  by  double  red  lines,  as  in  the  case  of  W.  E.  Morrison,  this  lesson. 

95.  If  the  business  is  owned  by  an  individual,  there  is,  of  course,  no  adjust- 
ment of  profits  and  losses  necessary.     There  is  simply  the  relation  between  the 
business  in  the  abstract  and  the  proprietor.     The  net  profits  of  the  business  are 
credited  to  the  proprietor,  or  the  net  loss  is  debited  to  him.     This  is  fully  illus- 
trated in  the  model. 

96.  After  closing  the  ledger,  it  is  of  the  utmost  importance  that  the  balances 
below  the  rulings  be  checked  with  the  statement  of  resources  and  liabilities. 
All  the  balances  which  appear  under  resources,  and  no  more,  must  be  under  the 
ruling  on  the  debit  side ;    and  all  the  balances  which  appear  under  liabilities, 
including  the  present  worth,  and  no  more,  must  be  on  the  credit  side.     The 
sums  of  the  two  sides  must  be  equal. 

WRITTEN  EXERCISE 

(^4)  With  the  balance  sheet  and  ledger  before  you,  turn  to  the  cash  account. 
On  the  smaller,  or  credit,  side  write  in  red  ink  on  the  next  line  under  the  last 
entry,  Feb.  28,  Balance  162.  Then  rule  the  account  exactly  as  shown  in  the 
model.  Finally  bring  down  the  balance  under  the  ruling  on  the  debit  side, 
writing  in  black  ink,  March  1,  Balance,  162.  Observe  that  this  is  merely 


REVIEW  QUESTIONS  53 

canceling  $  258  from  both  sides  of  the  account,  thus  simplifying  it  for  the  next 
period  and  making  it  more  convenient  for  reference. 

Next  turn  to  the  Horses  account.  On  the  smaller,  or  debit,  side  write 
in  red  ink,  Feb.  28,  Loss  &  Gain,  50.  The  Cows  account  and  the  Ex- 
pense account  are  closed  in  the  same  manner,  except  that  Expense  shows  a 
loss. 

(E)  Now  bring  the  gain  from  Horses  and  Cows  into  the  credit  side  of  the 
Loss  and  Gain,  and  the  loss  from  Expense  into  the  debit  side  of  Loss  and  Gain. 
Balance  the  latter  account  by  writing  in  red  ink  on  the  smaller,  or  credit,  side 
Feb.  28,  Net  Gain,  52.  Credit  the  Proprietor  with  the  net  gain.  Write  in 
black  ink,  as  shown  in  the  model. 

(C)  Rule  Morrison's  account,  as  directed  in  paragraph  94. 

(D)  Finally  check  all  the  balances  below  the  ruling  in  the  closed  accounts, 
as  directed  in  paragraph  96. 

LESSON   16 

REVIEW   QUESTIONS 

ON  LESSONS  12,  13,  14,  AND  15 

61.  Define  journalizing. 

62.  Define  an  entry. 

63.  Define  and  illustrate  simple  journal  entry. 

64.  Define  and  illustrate  compound  journal  entry. 

65.  How  should  errors  be  corrected  ? 

66.  Define  posting. 

67.  Explain  the  method  and  importance  of  indicating  pages  from  and  to 
which  entries  are  posted. 

68.  Why  is  it  important  to  index  the  accounts  properly  ? 

69.  What  does  the  trial  balance  show  ? 

70.  What  does  it  prove  ? 

71.  How  should  errors  indicated  in  the  trial  balance  be  found  ? 

72.  What  does  the  balance  of  the  proprietor's  account  show  ? 

73.  On  which  side  of  the  account  must  the  cash  balance  occur  ? 

74.  What  does  the  balance  of  a  property  account  show  ? 

75.  Of  an  expense  account  ? 

76.  Of  accounts  with  persons  ? 

77.  What  is  a  balance  sheet  and  what  does  it  show  ? 


54  PRINCIPLES  OF  BOOKKEEPING 

78.  Define  the  net  worth  of  a  business. 

79.  In  what  two  ways  is  the  present  worth  found  ? 

80.  When  does  an  account  show  a  resource  ? 

81.  A  loss? 

82.  What  does  the  cash  account  show  ?    When  may  it  show  a  liability  ? 

84.  When  does  an  account  with  a  person  show  a  resource  ?    A  liability  ? 

85.  What  is  the  object  of  closing  the  ledger  ? 

86.  What  is  the  meaning  of  closing  an  account  ? 

87.  What  steps  are  necessary  before  the  ledger  can  be  closed  ? 

88.  What  accounts  must  be  closed  ?    Which  may  be  closed  ? 

89.  What  is  the  significance  of  double  ruling  ? 

90.  What  is  the  significance  of  red-ink  entries  ? 

92-94.  When  and  how  should  an  account  with  persons  be  balanced  ? 

95.  Does  the  net  gain  or  net  loss  of  the  business  affect  the  proprietor's 
account  ? 

96.  Why  must  the  balances  below  the  ruling  be  checked  with  the  statement 
of  resources  and  liabilities  after  the  ledger  is  closed  ? 


PRODUCE  SET  55 

LESSON   17 

PRODUCE   SET 

This  set  is  introduced  for  additional  practice.  The  new  feature  in  book- 
keeping principles  is  the  introduction  of  the  produce  and  expense  inventory. 

A.  Journalizing. 

This  is  done  in  exactly  the  same  form  as  in  lesson  12.     The  only  difference 
is  in  the  titles  of  accounts.     Four  pages  of  journal  paper  will  be  required. 

B.  Posting. 

You  will  need  four  pages  of  ledger  paper.  Number  the  pages.  Place  three 
accounts  on  each  page,  the  last  being  Loss  &  Gain.  Proceed  exactly  the  same 
as  in  lesson  13.  Do  not  forget  the  page  numbers  when  posting. 

March  1,  19 — .     (Your  name)  engages  in  the  produce  business,  investing 

$100. 

3  —  Bought  for  cash,  100  potato  sacks  at  5  £. 
3  —  Bought  for  cash,  70  cwt.  potatoes  at  $  1  cwt. 
5  —  Sold  to  H.  F.  Bowman  on  account,  20  cwt.  potatoes  at  $  1.20. 

5  —  Paid  for  hauling  potatoes,  $  1. 

6  —  Sold  to  J.  T.  Smith  on  account,  5  cwt.  potatoes  at  $  1.20. 

6  —  Bought  of  C.  C.  Galloway  on  account,  80  cwt.  potatoes  at  $  1. 

7  —  Sold  to  Arthur  Brown  on  account,  10  cwt.  potatoes  at  $  1.20. 
9  —  Bought  for  cash,  10  cwt.  potatoes  at  $  1. 

12  —  Bought  of  W.  S.  Bridges  on  account,  15  cwt.  potatoes  at  $  1. 
14  —  Sold  for  cash,  5  cwt.  potatoes  at  $  1.20. 

17  —  Sold  for  cash,  15  cwt.  potatoes  at  $  1.20. 

18  —  Arthur  Brown  paid  $  12  in  full  of  account. 

21  —  Bought  of  Joe  Smith  on  account,  10  cwt.  potatoes  at  $  1. 
26  —  Sold  to  Hotel  Julian,  100  cwt.  potatoes  at  $  1.10. 
28  —  Paid  C.  C.  Galloway  $  80  in  full  of  account. 
Inventory:  50  potato  sacks  at  5 £ ;  16  cwt.  potatoes  at  $  1. 

LESSON   18 
PRODUCE  SET  —  Continued 

C.  The  Trial  Balance. 

Total  the  ledger  accounts  in  pencil  and  proceed  in  the  same  manner  as  in 
lesson  14.  Have  your  work  checked  by  your  teacher. 


56  PRINCIPLES  OF  BOOKKEEPING 

D.  The  Financial  Statement,  or  Balance  Sheet. 

This  is  the  same  in  form  as  in  lesson  14,  except  that  the  inventory  must  be 
taken  into  account.  Proceed  as  follows :  On  two  slips  of  paper,  headed,  re- 
spectively, Resources  and  Liabilities,  Losses  and  Gains,  you  will  classify  the 
accounts  the  same  as  in  lesson  14.  The  Produce  account  shows  a  cost  (debit) 
of  $  185  and  a  return  (credit)  of  $  176.  You  find  that  you  have  on  hand  $  16 
worth  of  potatoes.  Add  this  to  the  credit  and  the  result  is  $192;  subtracting 
the  cost  will  show  the  gain  on  produce  $7.  The  $16  is  placed  under  the  Re- 
sources and  the  $7  under  the  Gains.  Expense  is  debited  with  $6 ;  but  you  find 
that  $2.50  of  this  has  not  been  used  up,  hence  it  should  be  deducted.  The  net 
loss  under  expense  is,  therefore,  $3.50.  The  $2.50  is  placed  under  the  Re- 
sources and  the  $3.50  under  Losses.  Complete  the  statement,  as  shown  in  illus- 
tration 12,  page  44. 

LESSON   19 
PRODUCE  SET  —  Continued 

E.  Closing  the  Ledger. 

The  ledger  is  closed  in  the  same  manner  as  in  lesson  15,  except  that  the 
produce  and  expense  inventories  are  entered  on  the  credit  side  of  their  respective 
accounts  in  red  ink  before  those  accounts  are  closed. 

LESSON  20 
SPECIAL  BALANCE  SHEET  NO.  1 

From  the  following  trial  balance  make  a  balance  sheet : 
Robert  Ward  —  Prop.  $5720. 

Merchandise  $  338.80 

Expense  450. 

Cash  3509.21 

Henry  Brown  926.39 

James  Bristol  586.50 

Frank  M.  Howe  1205.25 

George  W.  Brown  686.15 

C.  W.  Wilson  610. 

$7016.15        $7016.15 

Mdse.  inventory  $1536.10 

Expense  inventory  359, 


PRODUCE  SET 


57 


LESSON  21 
SPECIAL   BALANCE    SHEET   NO.  2 

From  the  following  trial  balance  make  a  balance  sheet : 

(Your  name)  —  Prop.  $4750. 

Merchandise  $  877.89 

Cash  2513.97 

Expense  238.90 

Mason  Produce  Co.  287.50 

Jones  Grain  Co.  2986.25 

H.  H.  Grayson  &  Son  287.50 

Henry  Holmes  982.29 

J.  D.  Anderson  1137.42 

M.  F.  Wilson  &  Bro.  322.30 

$7192.01        $7192.01 


Mdse.  inventory 
Expense  inventory 


$1250.25 
160. 

SUPPLEMENTARY  EXERCISE 
SPECIAL   BALANCE    SHEET   NO.  3 


From  the  following  trial  balance  make  a  balance  sheet : 
William  F.  Morris  —  Prop. 

Cash  $  1631.14 

Merchandise  1496.93 

Expense  156.11 

Henry  Ford  81.60 

C.  M.  Stanley  66.50 

A.  L.  Benson  126.10 
L.  J.  Ferris                                                                            592.12 
Geo.  H.  Putman                                                                  1165. 
H.  J.  Miller 

John  H.  Moore 
Roy  O.  Cook 

B.  W.  VanWie 


Mdse.  inventory 
Expense  inventory 


$2110. 
80. 


$4033.80 


145.01 
207.84 
336.06 

592.79 

$5315.50        $5315.50 


58 


PRINCIPLES  OF  BOOKKEEPING 


LESSON  22 
SPECIAL   CLOSING   EXERCISE  NO.  1 

Copy  the  following  accounts  on  a  ledger  sheet,  allowing  one  fourth  of  a  page 
to  each  account,  and  close  the  ledger : 


DEBIT 


DEBIT 


DEBIT 


DEBIT 


(YOUR  NAME)  —  PROP. 


MERCHANDISE 


EXPENSE 


Loss  &  GAIN 


CREDIT 


Jan. 

10 
30 

J. 
J. 

3 

6 

100 
50 

Jan. 

1 

J. 

1 

3000 

CREDIT 


Jan. 

1 

J. 

1 

286 

50 

Jan. 

1 

J. 

1 

297 

50 

3 

J. 

1 

437 

60 

15 

J. 

3 

386 

40 

30 

J. 

6 

542 

80 

30 

J. 

6 

225 

CREDIT 


Jan. 

1 

J. 

1 

100 

10 

J. 

3 

50 

31 

J. 

6 

150 

CREDIT 


Mdse.  inventory  $462. 

Expense  inventory  $150. 

NOTE.  —  Cash  account  has  a  balance  of  $  2192  but  is  not  included,  as  it 
does  not  need  to  be  closed. 

After  closing  the  ledger,  take  a  trial  balance,  using  the  cash  balance  given 
in  the  above  note.  This  is  called  a  proof  trial  balance,  as  it  shows  that  all 
balances,  etc.,  have  been  brought  down  below  the  ruling. 


PRODUCE  SET 


59 


LESSON  23 
SPECIAL    CLOSING   EXERCISE    NO.  2 

Copy  the  following  accounts  on  a  ledger  sheet  and  close  the  ledger : 


DEBIT                                                                                                                                            CREDIT 

Jan. 

10 

J. 

6 

300 

Jan. 

1 

J. 

1 

6000 

DEBIT                                                        CREDIT 

Jan. 

1 

J. 

1 

942 

75 

Jan. 

2 

J. 

3 

430 

25 

2 

J. 

2 

685 

50 

3 

J. 

3 

520 

35 

3 

J. 

2 

1438 

25 

3 

J. 

4 

225 

70 

4 

J. 

2 

1242 

4 

J. 

4 

1520 

10 

EXPENSE 


DEBIT                                                                                                                                            CREDIT 

Jan. 

1 

J. 

1 

120 

2 

J. 

2 

50 

DEBIT 


Loss  &  GAIN 


CREDIT 


Mdse.  inventory  $2320. 

Expense  inventory  $70. 

NOTE.  —  Cash  account  shows  a  debit  balance  of  $3917.90. 

Make  a  proof  trial  balance. 

SUPPLEMENTARY  EXERCISE 
SPECIAL   CLOSING  EXERCISE    NO.  3 

Copy  the  following  accounts  on  a  ledger  sheet  and  close  the  ledger : 


DEBIT                                                        CREDIT 

Jan. 

15 

J. 

16 

1200 

Jan. 

1 

J. 

1 

11000 

60 


PRINCIPLES  OF  BOOKKEEPING 
MERCHANDISE 


DEBIT 


CREDIT 


Jan. 

1 

J. 

1 

2890 

20 

Jan. 

2 

J. 

2 

1428 

10 

3 

J. 

2 

8420 

50 

3 

J. 

2 

564 

30 

4 

J. 

3 

1356 

10 

5 

J. 

8 

1426 

50 

EXPENSE 


DEBIT 


CREDIT 


Jan. 

1 
5 

J. 
J. 

1 
6 

250 
560 

10 

Loss  &  GAIN 


DEBIT 


CREDIT 


Mdse.  inventory 

Expense  inventory  $560. 

NOTE.  —  Cash  account  shows  a  debit  balance  of  $2454.20. 

Make  a  proof  trial  balance. 

LESSON  24 
SIX-COLUMN  BALANCE  SHEET 

In  the  preparation  of  a  financial  statement,  it  is  sometimes  best  to  arrange 
the  items  in  a  tabular  form,  illustration  13,  page  61.  It  has  the  advantage  of 
being  easily  checked  and  of  showing  in  a  condensed  form  the  essential  facts  of 
the  financial  condition  of  a  business;  but  it  is  inconvenient  for  publication. 
Hence  some  bookkeepers  use  this  only  as  a  working  sheet,  and  then  arrange  it 
into  the  statement  form,  if  it  is  to  be  published. 

WRITTEN  EXERCISE 

A.  Rule  a  sheet  of  practice  paper  exactly  like  illustration  13,  if  ruled  paper 
is  not  provided.  Then  prepare  a  six-column  balance  sheet  from  data  given  in 
lesson  20.  Note  that  the  inventories  are  either  written  in  red  ink  or  within 
parenthesis.  Hand  in  your  work  for  approval. 


REVIEW  QUESTIONS 


61 


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VUsowcccs 


J 


l-coo 


yo  o 

f~00  O 

foo 

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ooo  o 


'oooo 


/ceo 


Zooo 


"/GO 


foo 


30-/S 


/  0  0 

J  00 


'30JJ' 


Illustration  13 

B.     In  the  same  manner  prepare  similar  balance  sheets  from  data  given  in 
lesson  21.     Hand  in  your  work  for  approval. 

LESSON  25 
REVIEW    QUESTIONS 

ON  LESSONS  19  TO  24 

NOTE.  —  Since  the  following  questions    are    not    answered   in    numbered 
paragraphs,  the  numbers  at  the  left  are  not  paragraph  numbers. 


62  PRINCIPLES  OF  BOOKKEEPING 

1.  Lesson  19  —  What  was  done  with  the  produce  and  expense  inventories 
before  closing  the  ledger  ? 

2.  Lesson  20-21  —  Explain  your  balance  sheets,  giving  the  reasons  for  each 
step. 

3.  Lessons  22-23  —  What  is  shown  by  the  debit  side  of  your  own  account  ? 
The  credit  side  ? 

4.  What,  is  shown  by  the  debit  side  of  the  merchandise  account  ?    The  credit 
side  ?  . 

5.  What  is  shown  by  the  debit  side  of  the  expense  account  ?    The  credit  side  ? 

6.  What  is  meant  by  "  merchandise  inventory  —  $  462  "  ? 

7.  What  is  meant  by  "expense  inventory  —  $  150"  ? 

8.  Why  is  not  the  cash  account  included  in  these  exercises  ? 

9.  When  the  ledger  is  closed  what  does  the  proprietor's  account  show  ?    The 
merchandise  account  ?    The  expense  account  ? 

10.  Wrhat  is  meant  by  a  "proof  trial  balance"  ? 

11.  Describe  the  six-column  balance  sheet. 

12.  What  advantage  has  this  form  of  financial  statement  ?    What  disadvan- 
tage has  it  ? 


BILLS  RECEIVABLE  AND  BILLS  PAYABLE  63 

LESSON  26 
BILLS  RECEIVABLE  AND   BILLS  PAYABLE 

97.  A  promissory  note  is  a  written  unconditional  promise  to  pay  a  certain 
sum  of  money  to  a  certain  person  or  his  order  at  a  specified  time  and  place, 
properly  signed  by  the  party  making  the  promise. 

98.  The  party  making  the  promise  is  called  the  maker.     The  one  to  whose 
order  the  money  is  to  be  paid  is  the  payee. 

99.  Illustration : 


<&^ 


'     .  /  .   ^  v 


Illustration  14 

In  this  note  John  Doe  is  the  maker  and  Richard  Roe  is  the  payee. 

100.  When  things  are  sold  on  credit,  the  buyer  may  give  either  his  oral  or 
written  promise  to  pay  for  them  at  some  future  time.  If  the  latter  is  given,  it 
is  usually  in  the  form  of  the  note  shown  above,  and  since  it  is  property,  it  is 
entered  in  the  records  according  to  the  rules  already  learned  for  journalizing  prop- 
erty —  debit  that  which  comes  into  the  business  and  credit  that  which  goes  out. 

J01.  Notes  in  our  favor  we  call  "Bills  Receivable."  Those  which  we  make 
in  favor  of  others  are  called  "Bills  Payable." 

102.  At  the  time  we  receive  a  bill   receivable  we  debit  Bills  Receivable 
account.     When  it  becomes  due  and  is  paid  by  the  maker,  we  credit  Bills  Re- 
ceivable account,  because  we  give  it  back  to  the  maker  and  thus  it  goes  out  of 
the  business. 

103.  When  we  give  our  note  to  another  person,  we  credit  Bills  Payable. 
When  we  pay  it  at  maturity,  we  receive  it  back  and  therefore  debit  Bills  Payable. 


64  PRINCIPLES  OF  BOOKKEEPING 

WRITTEN  EXERCISE 
BILLS    RECEIVABLE 

The  following  transactions  illustrate  the  Bills  Receivable  account.     Using  a 
journal  and  a  ledger,  journalize,  post  and  make  a  trial  balance. 
Apr.       1  —  (Your  name)  began  business  and  invested  notes  signed  by  B.  R. 
Skinner  and  E.  H.  Davis,  $  500  and  $  600. 

2  —  Received  of  W.  H.  Cobb  on  account  his  2  months'  note,  $  159.38. 

3  —  D.  C.  Duncan  remits  his  note  to  balance  his  account,  $  237.45. 

4  —  B.  R.  Skinner  pays  his  note  in  cash,  $  500. 

5  —  Received  of  A.  J.  Goss  his  note  to  apply  on  account,  $  376.50. 

6  —  E.  H.  Davis  remits  his  check  for  his  note,  $  600. 

7  —  Sent  Telephone  Company  a  check  for  $  15  in  payment  of  three 

months'  service. 

8  —  Received  of  A.  H.  Jones  his  note  in  full  of  account,  $  300. 

9  —  Sold  W.  B.  Weeks  on  his  note,  mdse.,  $  194.30. 

10  —  Sold  G.  A.  Harden  on  his  note,  mdse.,  $  574.50. 

11  —  Gave  W.  H.  Tucker  on  account  W.  H.  Cobb's  note,  $  159.38. 

12  —  Received  note  from  G.  A.  Bruce  on  account,  $  200. 

13  —  Bought  merchandise  of  W.  R.  Patten  amounting  to  $  792.58. 

Gave  A.  J.  Goss'  note  in  part  payment,  $  376.50. 

14  —  Received  cash  for  note  signed  by  B.  F.  Jenness,  $  150. 

15  —  D.  C.  Duncan  pays  cash  for  his  note  of  the  3d  inst.,  $  237.45. 

16  —  Received  note  at  30  days  from  E.  Norton  on  account,  $  500. 

17  —  Received  from  W.  H.  Page  60  day  note  in  full  of  account,  $458.47. 

18  —  Loaned  F.  H.  Morse  cash  on  his  30  day  note, 

19  —  Received  note  from  F.  W.  Perkins  on  account, 

LESSON  27 
BILLS    PAYABLE 

Journalize  and  post  the  following  transactions  illustrating  the  Bills  Payable 
account.     Make  a  trial  balance. 
May       1  —  Issued  to  G.  H.  Marsh  my  note  to  apply  on  account,  $  350. 

2  —  Bought  mdse.  of  G.  A.  Bruce  on  my  note,  $  362.85. 

3  —  Received  from  E.  H.  Davis  to  apply  on  account  his  note  for  $  196.34. 


BILLS  PAYABLE  AND   BILLS   RECEIVABLE  65 

May      4  —  Paid  by  check  my  note  in  favor  of  J.  L.  Brewster,  $  525. 

5  —  Gave  J.  V.  Chase  my  note  for  $  257.43  to  apply  on  account. 

6  —  Sold  G.  W.  Tucker  mdse.  and  received  in  payment  my  note  made 

in  favor  of  G.  H.  Marsh,  $  350. 

7  —  Gave  H.  H.  Putney  my  30  day  note  for  rent  of  store,  $  150. 

9  —  Gave  G.  H.  Tucker  my  60  day  note  to  apply  on  account,  $  150. 

10  —  Paid  my  note  of  the  5th  by  check,  $  257.43. 

11  —  Bought  of  G.  W.  Gate  on  my  note,  mdse.,  $775. 

12  —  Received  of  A.  T.  Howard  to  balance  his  account  my  note  of  the 

3d  made  in  favor  of  C.  H.  Bruce,  $  362.85. 

LESSON  28 
BILLS   PAYABLE   AND   BILLS   RECEIVABLE 

Journalize,  post,  and  make  a  trial  balance. 
June       1  —  (Your  name)  began  business  and  invested  cash,  $  2000. 

2  —  Paid  one  month's  rent  to  date,  $  75. 

3  —  Bought  for  cash,  100  bbl.  flour  at  $  5.75. 

4  —  Sold  for  cash,  15  bbl.  flour  at  $6.15. 

5  —  Sold  James  H.  Warren  on  account,  20  bbl.  flour  at  $  6.20. 

6  —  Drew  for  private  use,  $  25. 

7  —  Bought  of  B.  W.  Scott  on  account,  50  bbl.  flour  at  $  5.70. 

8  —  Sold  James  Brown  on  his  note  at  60  days,  25  bbl.  flour  at  $  6.18. 

9  —  Bought  of  D.  J.  Wright  on  my  note  at  30  days,  50  bbl.  flour  at 

$5.65. 

10  —  Received  cash  from  James  Brown  for  his  note,  $  154.50. 

11  —  Paid  my  note  in  favor  D.  J.  Wright,  $282.50. 

12  —  Sold  to  C.  M.  Johnson  mdse.  amounting  to  $840.     Received  in 

payment  his  note  for  $  400  balance  in  cash. 

13  —  Paid  by  check,  freight  bill  for  month,  $45. 

WRITTEN  EXERCISES 

A.     Assuming  that  James  Brown  lives  in  your  city  or  village,  write  the  note 
mentioned  in  lesson  28,  transaction  June  8. 

a.  Who  is  the  maker  ? 

b.  Who  is  the  payee  ? 

c.  When  will  the  note  be  due  ? 


66  PRINCIPLES  OF  BOOKKEEPING 

NOTE.  —  When  a  note  reads  "two  months  after  date,"  it  will  be  due  the  cor- 
responding day  in  the  second  month  after  it  is  made,  or  when  there  is  no  such 
day,  the  nearest  one  to  it.  Example :  A  note  made  Dec.  31,  1912,  to  run 
two  months,  will  be  due  February  28th,  as  there  is  no  31st  in  February.  If, 
however,  the  note  had  been  made  out  for  60  days  instead  of  2  months,  it  would 
have  been  due  March  1st,  as  actual  days  must  then  be  counted. 

B.  Write  the  note  mentioned  in  lesson  28,  transaction  June  9. 

a.  Who  is  the  maker  ? 

b.  Who  is  the  payee  ? 

c.  When  will  the  note  be  due  ? 

• 

INTEREST  AND  DISCOUNT 

C.  Interest  is  the  sum  paid  for  the  use  of  money.     The  legal  rate  of  interest 
is  that  rate  which  can  be  collected  on  an  interest  bearing  obligation  when  no 
rate  is  mentioned.     All  obligations  in  which  interest  is  stipulated  and  all  over- 
due obligations  draw  interest. 

The  maximun  rate  is  the  highest  rate  that  can  be  lawfully  contracted  for. 

A  rate  of  interest  higher  than  the  maximum  rate  is  called  usury. 

Discount  is  an  allowance  made  for  the  prepayment  of  an  obligation.  It  is 
computed  the  same  as  interest. 

When  we  pay  interest  to  others,  interest  is  debited. 

When  we  allow  discount  to  others,  discount  is  debited. 

When  interest  is  paid  to  us,  it  is  credited. 

When  discount  is  allowed  by  others  to  us,  it  is  credited. 

Interest  and  discount  applies  only  to  allowances  on  notes  and  other  commer- 
cial paper.  Allowances  on  invoices  are  called  Mdse.  Discount,  and  are  journal- 
ized the  same  as  interest  and  discount. 

Journalize,  post,  and  make  a  trial  balance. 

Jan.   2.     My  interest  bearing  note  of   Dec.   2  for  $200  in  favor  of  A.  H. 
Whitney  is  due  to-day.      Pay  same  in  cash.     (Debit  Bills  Payable, 
$200;  debit  Interest,  $1 ;  and  credit  Cash,  $201.) 
2.     Received  cash  of  J.  D.  Summers  for  his  interest  bearing  note  of  Dec.  2, 


3.     Gave  Henry  Richards  my  interest  bearing  note  for  three  months,  to 
apply  on  account, 


REVIEW   QUESTIONS  67 

Jan.  4.     Received  a  30  day  interest  bearing  note  of  Charles  Bowen,  $400,  to 
pay  for  invoice  of  the  3d  ult. 

5.  Received  cash  of  H.  II.  Mason  in  full  for  note  of  $780  and  interest 

from  Dec.  8. 

6.  Paid  my  interest  bearing  note  favor  of  Geo.  A.  Strong  with  interest  at 

5%  for  60  days.     Face  of  note,  $460. 

7.  Discounted  at  Commercial  Bank  the  note  received  from  Charles  Bowen 

on  the  4th  inst.,  receiving  cash  for  the  proceeds. 

8.  Prepaid  my  note  favor  of  Henry  Richards  given  the  3d  inst.  less  dis- 

count to  maturity. 

9.  On  Dec.  1,  I  gave  Henry  Wilson  a  90  day  note  with  interest  at  5% 

in  full  settlement  of  my  account.    At  his  request  I  pay  same  to-day 
less  discount  to  maturity.     Face  of  note,  $920. 

10.     On  Dec.  10,  H.  B.  Stone  gave  me  his  60  day  note  for  $260  with  interest. 
He  pays  same  in  cash  to-day  less  discount  to  maturity. 

LESSON  29 
REVIEW   QUESTIONS 

LESSONS  26,  27,  AND  28 

97.  What  is  a  promissory  note  ? 

98.  What  are  the  principal  parties  to  a  note  called  ?     Explain  the  relation 
of  each  party  to  the  note. 

100.  What  use  is  made  of  notes  in  business  ?     Is  a  note  considered  property  ? 

101.  Define  Bills  Receivable.     Bills  Payable. 

102.  Give  the  rule  for  journalizing  Bills  Receivable. 

103.  Give  the  rule  for  journalizing  Bills  Payable. 

What  is  interest  ? 

What  is  meant  by  legal  rate  ? 

What  is  the  legal  rate  per  cent  in  your  own  state  ? 

WThat  is  meant  by  the  term  usury  ? 

What  is  the  penalty  for  charging  usury  in  your  state  ? 

What  are  the  rules  for  journalizing  interest  ? 

What  is  discount  ? 

How  is  it  distinguished  from  merchandise  discount  ? 

How  are  discount  and  merchandise  discount  journalized  ? 


68  PRINCIPLES  OF  BOOKKEEPING 

LESSON   30 
BANKING 

104.  All  business  men  deposit  their  money  in  the  bank  and  pay  bills  by  check. 
This  does  away  with  the  necessity  of  handling  large  sums  of  money,  making 
change,  and  is  in  every  way  much  safer  than  using  currency.  When  a  debt  is 
paid  by  check,  the  one  who  receives  the  check  cannot  cash  it  at  the  bank  without 
writing  his  name  on  the  back  of  the  check,  which  is  called  indorsing  it,  and  thus 
the  canceled  check  becomes  a  receipt  for  the  money  paid  when  it  is  returned  to 
the  one  who  wrote  it  bv  the  bank  on  which  it  was  drawn. 


\\ 


ox\\e, 


\\cxwav\U 


Illustration  15 

105.  (A)  The  procedure  necessary  to  open  an  account  at  the  bank  is  simple. 
Select  the  bank  you  wish  to  deposit  in,  and  if  you  have  an  acquaintance  who  is 
known  at  this  bank,  ask  him  to  introduce  you  to  the  cashier.  If  you  are  known 
in  the  community,  an  introduction,  though  desirable,  is  not  necessary  unless  the 
rules  of  the  bank  require  it.  The  cashier  will  ask  you  to  fill  out  a  signature  card 
similar  to  the  above  illustration  15.  You  must  decide  on  the  exact  form  of  signa- 
ture you  will  use  and  after  writing  it  on  the  signature  card  do  not  use  any  other 


BANKING 


69 


form.  Consult  your  teacher  as  to  the  best  way  to  write  your  name.  It  is 
quite  customary  to  use  only  the  initials  when  there  are  two  given  names.  The 

three  initial  letters  should  be 
joined,  if  possible,  to  facilitate 
the  writing  of  your  signature. 
Be  sure  the  signature  you  adopt 
is  distinctive  and  perfectly  legi- 
ble. Simplicity  is  best,  as  a 
simple  signature  is  more  legible 
and  much  less  likely  to  be  forged 
successfully. 

(B)  Having    entered    your 
signature  on  the  card  provided  by 
the  bank  for  this  purpose,  you  will 
next  make  out  a  deposit  ticket 
similar  to  the  one  shown  in  illus- 
tration  16.     Hand  this   ticket 
with  your  money  to  the  cashier 
and  he  will  enter  the  amount  to 
your  credit  in  a  little  book  called 
the    "pass    book"    or    "bank 
book."      This    is   your   receipt 
for  the  deposit.     Whenever  you 
deposit  money,  this  bank  book 
should    be    presented    to     the 
one  receiving  the  deposit,   for 
entry. 

(C)  If  you  should  forget  your 
bankbook,  make  out  two  deposit 
tickets;  mark  one  "duplicate" 
and  hand  them  to  the  cashier  or 
teller  with  your  deposit.    He  will 
stamp  one  of  them  in  some  way 
to  indicate  that  the  deposit  has 

been  received  and  you  will  keep  this  one  as  a  receipt.  The  next  time  you  bring 
your  bank  book  to  the  bank  hand  this  "duplicate"  ticket  to  the  cashier  or 
teller  and  ask  him  to  enter  it  in  your  book. 


DEPOSITED   IN 

FARMERS  BANK 

ROCHESTER.  MINN. 

7,^Z    2-7       1 

9^ 

PLEASE      LIST      EACH      CHECK      SEPARATELY 

"££* 

GOLD 

^C 

«?ll     VFO 

/  V 

^4-<? 

CHECKS   AS    FOLLOWS: 

2-0  0 

/^c 

£  '  ,f 

TOTAL 
EXCHANGE 

Z^L£ 

j-£ 

Illustration  16 


70 


PRINCIPLES  OF  BOOKKEEPING 


(Z))  After  your  deposit  is  entered,  you  will  be  given  a  blank  check  book 
containing  checks  for  your  use.  The  forms  of  the  check  and  stub  are  shown  in 
illustration  17.  The  form  of  check  should  be  studied  and  practiced  until  you  can 
write  a  check  on  blank  paper.  These  checks  are  furnished  for  convenience,  but 
the  bank  will  pay  a  check  made  out  on  any  kind  of  paper  if  it  is  properly  written. 
Always  use  check  blanks  when  possible,  but  if  you  have  occasion  to  write  a  check 
where  you  can  get  no  blank,  tear  off  a  piece  of  good  quality  paper  about  eight 
and  one  half  inches  long  by  three  and  one  half  inches  wide  and  write  the  check, 
using  the  form  vou  have  learned. 


Pay  to  the 
Order  of 


L<^5 


Rochester,  Minn.,       -^Z>^&-.   2^3^        191 ^£. 

f^^f^^/^^7,^ 

.Dollars 


Illustration  17 

(E)  At  your  convenience  deposit  all  money,  checks,  post-office  money  orders, 
bank  drafts,  etc.,  in  the  bank.     Write  your  name  on  the  back  of  each  check, 
or  draft,  and  on  the  face  of  each  money  order  before  making  your  deposit  at 
the  bank.     By  doing  this  you  transfer  your  title  to  the  instrument ;  guarantee 
that  the  instrument  so  indorsed  is  properly  made  out ;  that  the  signatures 
already  on  the  instrument  are  genuine ;  that  you  are  the  rightful  owner  of  the 
instrument ;  and  that  if  it  is  not  paid  promptly  when  due  by  the  one  who  is 
supposed  to  pay  it,  you  will  pay  it  yourself,  provided  the  bank  gives  you 
prompt  notice  of  its  failure  to  receive  it  from  the  other  party. 

(F)  Once  each  month,  or  once  in  two  months  if   your  checks  are  not 
numerous,  leave  the  bank  book  at  the   bank   to    be    "written   up."     The 
total  amount  drawn  out  will  be  deducted  from  the  amount  of  the  deposits 
and  the  balance  to  your  credit  in  the  bank  will  be  indicated.     You  should 
compare  this  amount  with  the  amount  shown  by  the  balance  in  your  check 
book.     All  the  checks  you  have  drawn,  and  which  have  been  paid  by  the  bank, 
will  be  canceled  and  returned  to  you  with  your  bank  book.     File  them  as 
receipts  for  the  payments  which  they  represent.     To  prove  the  stub  of  your 


BANKING  71 

check  book  when  you  receive  your  bank  book  written  up,  deduct  the  total  of 
outstanding  checks  from  the  balance  as  shown  in  the  bank  book,  and  the  differ- 
ence should  equal  the  balance  as  shown  on  the  check  book  stub. 

106.  It  should  be  remembered  that  banks  welcome  small  deposits  as  well  as 
large  ones.     Your  bank  balance  may  be  small,  but  the  aggregate  of  small  balances 
is  large,  and  the  bank  is  able  to  handle  a  large  number  of  small  accounts  at  a 
profit.     Do  not  feel  that  you  must  wait  until  you  have  a  large  amount  to  deposit. 

107.  (^4)  There  are  many  reasons  why  you  should  early  establish  a  banking 
connection  in  addition  to  those  mentioned  above.     Your  financial  standing  in 
your  own  community  will  be  improved  by  opening  an  account  at  a  bank  and 
paying  by  check.     When  you  receive  checks,  money  orders,  etc.,  you  will  have 
no  trouble  getting  them  cashed,  while  if  you  are  not  known  at  any  bank,  you 
will  need  to  be  identified  before  any  bank  will  cash  them  for  you.     Then,  too, 
you  will  need  to  buy  bank  drafts  to  use  in  remitting  money  long  distances,  and 
if  you  have  no  bank  account,  the  bank  at  which  you  buy  a  bank  draft  will 
charge  you  for  it.     The  bank  draft  is  illustrated  and  explained  in  lesson  34. 

(B)  It  may  become  necessary  to  borrow  money  from  time  to  time  to  use  in 
your  business.  One  of  the  functions  of  the  bank  is  to  loan  money  to  customers 
at  interest,  for  short  periods  of  time,  usually  not  over  four  months,  on  good 
security.  This  is  in  many  ways  the  most  important  service  rendered  by  a  bank 
to  a  community. 

108.  All  checks  received  by  you  should  be  deposited  promptly,  as  you  will 
lose  the  amount  called  for  if  you  delay  and  the  bank  becomes  bankrupt  in  the 
meantime.     Checks  should  be  deposited  before  the  close  of  banking  hours  on 
the  day  following  their  receipt. 

109.  It  is  sometimes  desirable  to  have  the  check  show  on  the  face  of  it  that 
the  money  is  on  deposit  in  the  bank  to  meet  it.     When  this  is  the  case,  take  the 
check  to  the  bank  and  ask  to  have  it  certified.     It  will  be  stamped  "certified," 
or  "good"  over  the  signature  of  the  proper  officer  of  the  bank.     From  then  on, 
the  bank  is  obligated  to  pay  it  and  nothing  less  than  bankruptcy  of  the  bank 
will  keep  the  rightful  holder  of  the  check  from  getting  his  money. 

110.  Short-time  notes  received  from  debtors  should  be  made  payable  at  your 
bank,  and  then  you  can  readily  discount  them  to  secure  money  for  immediate 
use.     This  means  that  the  bank  will  advance  the  amount  called  for  in  the  note 
less  the  interest  to  the  date  of  maturity.     You  will  be  required  to  indorse  the 
note,  as  explained  in  section  105  (E). 


72  PRINCIPLES  OF  BOOKKEEPING 

WRITTEN  EXERCISES 

A.  You  have  $10  in  paper  money;  $3  in  silver;.  $2  in  small  change;  and 
a  check  for  $  7.50  from  Henry  Rogers.     Rule  a  deposit  ticket  form  and  make 
out  a  ticket  to  deposit  the  above  cash. 

B.  You  have  a  $25  check  from  Morris  Mason ;  a  $5  gold  piece ;  4  half  dol- 
lars ;  3  quarters ;  and  30  pennies.     Suppose  you  forgot  to  take  your  bank  book 
to  the  bank.     Proceed  to  make  the  deposit  without  it. 

LESSON   31 

REVIEW  QUESTIONS 

ON  LESSON  30 

104.  Mention  the  advantages  of  depositing  your  money  in  the  bank  and 
107.  (A)  paying  by  check. 

105.  (A)  Tell  how  to  open  a  bank  account. 

105.  (^4)  What  have  you  learned  about  the  use  of  a  signature  ? 

105.  (B)  What  is  a  deposit  ticket  ? 

105.  (B)  What  is  the  bank  book  and  what  is  its  purpose  ? 

105.  (C)  If  you  forgot  to  take  your  bank  book  with  you  to  the  bank,  how 
would  you  proceed  ? 

105.  (D)  Is  it  absolutely  necessary  to  use  one  of  the  blank  checks  furnished 
by  the  bank  ? 

105.  (E]  What  do  you  deposit  in  the  bank  ? 

105.  (E)  What  is  meant  by  indorsing  checks,  etc.,  before  depositing 
them? 

105.   (E)  What  is  the  contract  of  the  indorser  ? 

105.  (F)  What  is  meant  by  "writing  up"  the  bank  book?  How  often 
should  this  be  done  ? 

105.  (F)  What  will  you  do  with  canceled  checks  returned  by  the  bank  ? 

106.  What  is  the  attitude  of  the  bank  toward  small  depositors  ? 

107.  (B}  What  is  one  of  the  most  important  services  rendered  to  a  community 
by  a  bank  ? 

108.  When  should  all  checks  received  be  deposited  ?     Why  ? 

109.  Explain  what  is  meant  by  getting  a  check  certified. 

110.  Where  should  short-time  notes  be  made  payable  ?     Why  ? 


BUSINESS  LETTER  73 

LESSON   32 
THE  BUSINESS   LETTER 

111.  In  agricultural  as  well  as  in  other  lines  of  business  it  is  necessary  to 
write  many  letters,  and  since  nothing  more  surely  indicates  the  kind  of  business 
men  we  are  than  the  letters  we  write,  we  should  give  some  thought  to  this  matter. 

112.  A  simple  letterhead  should  be  used.      This  may  consist  of  the  name 
of  the  farm,  the  address,  and  the  name  of  the  proprietor.     For  example : 

HILLHURST  FARM 
F.  E.  HOVEY,  PROPRIETOR 

Avon,  N.  Y. 

When  such  a  letterhead  is  used,  it  is  not  necessary  to  write  the  address  of  the 
proprietor  as  a  part  of  the  heading  of  the  letter. 

Other  forms  of  simple  letterheads  are  shown  below. 

Pleasant  Grove  Farm 

J.  C.  HANSON,  PROPRIETOR 

FINE  APPLES,   PEACHES.  AND  OTHER   FRUITS  GENERAL  FARMING  AND  STOCKRAISING 

ANDERSON'S  ORCHARD  HOME  FARM 

G.  N.  ANDERSON7 

TALENT,  OREGON, 19 

MERRITT  GREENE  &  SON 

•'EDGEWORTH" 


PRODUCERS  OP 
HIGH  GRADE  WINTER  WHEAT, 


HOLSTEIN   CATTLE 

"  EDGEWORTH  "     FARM . 


LINN  BROOK  DAIRY  CO. 
MARSHALLTOWN,  IOWA. 


PRINCIPLES  OF  BOOKKEEPING 


MAPLE  HILL  FARM 

J.   C.   FARQUHAR,   PROPRIETOR 

R.  F.  D.  No.  1 


MIDLAND    FARM 

M.  J*  Harper 

R.  F.  D.  No.  2 
Farmers   Phone    14x2 


PHIL   F.  STANDISH 


MILTON  STANDISH 


STANDISH  BROTHERS 

FRUIT   RANCH 


THREE  AND  ONE-HALF   MILES 
EAST  OF  ESTACADA 


ESTACADA,  OREGON, 


.19 


THE  WALNUT  HILL  FARM 

FAY  F.  DEAN 
SHADOW  BROOK  FARM 

R.   H.    WALLACE,  Proprietor 

HOOD  RIVER,   OREGON 


AUG.   PAASCH 

FRUIT    GROWER 


113.  Select  a  good  quality  of  white  paper,  8|  X  11.     Use  the  best  writing 
fluid  (not  ink)  and  a  medium  pen.    A  blotter  should  always  be  kept  at  hand,  and 
its  use  will  materially  improve  the  appearance  of  your  letters.     Many  farmers 
find  it  desirable  to  use  a  typewriter.     While  speed  cannot  be  acquired  without 
much  practice,  it  is  possible  to  learn  to  write  accurately  and  with  a  fair  degree  of 
speed  in  a  very  short  time.     Often  the  wife  or  daughter  will  do  this  part  of  the 
office  work.     Typewritten  letters  create  a  favorable  impression,  and  as  an 
advertisement,  easily  justify  the  necessary  expenditure  of  money  and  time  to 
make  their  use  possible.     If  pen  is  used,  the  paper  should  be  horizontally  ruled 
below  the  heading.     Some  prefer  to  use  plain  paper,  and  a  little  practice  will 
enable  one  to  keep  the  lines  straight. 

114.  The  parts  of  a  letter  are  (1)  the  heading,  which  consists  of  the  address 
of  the  writer  and  the  date ;  (2)  the  name  and  address  of  the  one  to  whom  the  letter 
is  written;  (3)  the  salutation,  consisting  of  "Dear  Sir,"  "Gentlemen,"  or  some 
other  appropriate  expression ;    (4)  the  body,  which  includes  the  text  of  the 


BUSINESS  LETTER 


75 


HILLHURST  FARM 

AVON.    N     Y 


',    /  f  /J  . 


Illustration  18 


letter;  (5)  the  complimentary  closing,  such  as  "Yours  truly,"  etc. ;  and  (6)  the 
signature  of  the  writer. 

115.  The  above  illustration  is  a  proper  form  of  a  pen-written  business  letter 
having  a  two-line  address. 


76  PRINCIPLES  OF  BOOKKEEPING 

116.  The  following  will  illustrate  a  correct  form  of  typewritten  letter  show- 
ing a  three-line  address : 

287  Main  St. , 

Corvallis,  Ore.,  June  6,  1913. 
Mr.  Henry  Thompson, 
682  State  St. , 

Rochester,  N.  Y. 

Dear  Sir  : 

We  are  at  a  loss  to  know  why  you  have  ignored  our  several 
letters  regarding  the  settlement  of  your  account,  which  is 
long  past  due.  Our  treatment  of  you  has  not  been  such  as  to 
merit  this  apparent  discourtesy  on  your  part,  and  we  dislike 
to  believe  it  is  intentional. 

In  accordance  with  our  established  custom,  we  shall 
place  the  account  in  the  hands  of  our  attorney  for  collec- 
tion on  June  20,  unless  we  hear  from  you  by  that  time  with 
remittance  or  satisfactory  explanation. 

Yours  truly, 

H.  C.  Frey  &  Co. 

117.  Letters  ordering  goods  should  be  written  with  great  care  to  insure 
prompt  and  satisfactory  attention.     When  ordering  from  a  catalog,  the  exact 
names,  numbers,  etc.,  should  always  be  used.     Each  item,  where  there  are 
several,  should  be  written  on  a  separate  line ;  shipping  directions  should  be  given ; 
and  usually  the  letter  should  contain  some  statement  regarding  payment.     The 
following  is  a  good  form  for  such  a  letter : 

R.F.D.    1, 

GENEVA,  N.  Y.,  June  1,  1913. 
GENEVA  HARDWARE  Co., 

Geneva,  N.  Y. 
Gentlemen : 

Send  me  the  following  items  by  parcel  post  and  I  will  remit  by  check  upon 
receipt  of  bill : 

5  Ib.  No.  8  Wire  Nails 

1  Sargent  Greenleaf  Padlock,  No.  5 

Very  truly  yours, 

HENRY  HOLMES. 


BUSINESS   LETTER  77 

118.  (A)  When  payments  are  made  by  mail,  a  brief  letter  should  accompany 
the  remittance  unless  the  invoice  being  paid  can  be  inclosed  for  receipt.  When 
a  letter  is  written,  the  amount,  kind,  and  purpose  of  the  remittance  should  be 
stated.  A  simple  form  of  such  a  letter  is  shown  in  the  following  illustration : 

R.F.D.   1, 

GENEVA,  N.  Y.,  June  3,  1913. 
GENEVA  HARDWARE  Co., 

Geneva,  N.  Y. 
Gentlemen : 

Inclosed  find  check  on  Citizens' "Bank  of  Geneva  for  $1.25,  the  amount  of  your 
invoice  of  the  2d  inst. 

Yours  truly, 

HENRY  HOLMES. 

So  far  as  possible  all  payments  should  be  made  by  check.  Since  banks  in 
distant  places  will  charge  a  small  amount  for  cashing  your-  check,  however,  you 
should  save  your  creditor  this  expense  by  making  your  remittance  either  by  bank 
draft  or  post-office  money  order.  The  former  will  be  issued  by  your  bank  without 
charge,  while  the  latter  will  cost  a  small  amount.  Only  when  your  post  office 
is  nearer  your  home  than  your  bank  would  it  be  advised  that  you  use  the  post- 
office  money  order.  The  bank  draft  will  be  illustrated  and  explained  in  lesson  34. 

(B)  Accurate  postal  information  is  printed  for  the  benefit  of  all  persons 
who  are  interested.  Postmasters  will  furnish  a  pamphlet  of  general  postal  in- 
formation without  charge. 

WRITTEN  EXERCISES 

A.  Arrange  a  suitable  letterhead  for  your  father's  farm. 

B.  Using  paper  8^  X  11,  write  a  letter  to  Marshall  Field  &  Co.,  Chicago, 
111.,  or  any  other  firm,  ordering  five  articles.     Use  their  catalog,  if  possible,  and 
follow  directions  regarding  names  of  items,  etc. 

C.  Your  note  mentioned  in  lesson  28,  June  9th,  and  written  in  exercise  B, 
lesson  29,  is  due.     Write  a  letter  to  accompany  your  check  on  Third  National 
College  Bank  of  your  place,  which  you  will  send  in  payment. 

D.  From  postal  information  books  which  you  may  secure  from  your  post- 
master, ascertain  the  regular  postage  rates  and  the  parcel-post  rates  to  the  prin- 
cipal cities  of  the  country  and  to  the  principal  places  near  your  home. 


78  PRINCIPLES  OF  BOOKKEEPING 

OPTIONAL  EXERCISE 

Study  the  uses  that  can  be  made  of  the  parcel  post  by  you,  either  in 
buying  from  or  selling  to  persons  outside  your  immediate  locality. 


REVIEW  QUESTIONS 
ON  LESSON  32 

111.  Why  should  we  give  special  thought-to  our  letters  ? 

112.  Of  what  should  the  letterhead  consist?    What  is  the  advantage  of 
using  a  letterhead  ? 

113.  What  materials  are  desirable  to  use  in  the  correspondence  of  a  business  ? 

114.  What  are  the  parts  of  a  business  letter? 

115.  116.  How  should  these  parts  be  arranged  on  the  letterhead  ? 

117.  What  directions  should  be  observed  in  writing  letters  ordering  things? 

118.  (A*)  What  directions  should  be  observed  in  writing  letters  accompany- 
ing remittances  ? 

118.  (5)  Where  can  you  get  accurate  postal  information  ? 


BUSINESS   FORMS 


79 


LESSON   34 
BUSINESS   FORMS 

119.  Among  the  business  forms  with  which  every  business  man  should  be 
familiar  are  the  following :  Invoice,  promissory  note,  check,  bank  draft,  receipt, 
and  simple  contract. 

120.  (^4)  An  invoice  is  an  itemized  list  of  goods  sold,  or  services  rendered, 
showing  date,  prices,  terms,  and  amount.     The  following  is  an  illustration  of  a 
simple  form : 


Bought  of 

GENERAL  FARM    IMPLEMENT   COMPANY 


TERMS 


792  COURT  STREET 


TELEPHONE-MAIN  1694 


Illustration  19 

(B)  Blank  invoice  pads  can  be  secured  at  any  stationery  store.      Names 
and  place  can  be  written  in.    It  is  not,  therefore,  necessary  to  have  printed  forms 
unless  the  number  used  would  justify  the  additional  expense.     Sales  slips  like 
illustration  20,  page  80,  can  also  be  purchased. 

(C)  These  slips  are  made  in  duplicate,  and  by  using  a  sheet  of  carbon  paper 
under  the  original,  a  second  copy  can  be  made  by  one  writing.     The  carbon  copy 


80 


PRINCIPLES  OF  BOOKKEEPING 


and  original  are  separated  by  a  perforated  line.  The  original  is  sent  to  the 
purchaser  and  the  copy  is  left  in  the  book  as  the  seller's  memorandum  of  the 
sale  from  which  proper  book  records  can  be  made. 

(D)  When  an  invoice,  or  a  sales  slip,  is  returned  with  the  remittance,  it 


Date 


2~7.       '9 


Nam 


A  d dress . 


Sold  by 


Am't  Rec'd 


f'O  e^er7--^f2^f?^  (ft- 

~J     —fj--   -^_. 


2-2-  <l 


28 


Illustration  20 

should  be  marked  "Paid,"  with  date  and  signature,  and  sent  back  to  the 
remitter  as  a  receipt. 

121.  The  promissory  note  is  illustrated  and  discussed  in  lesson  26. 

122.  (.4)  A  check  is  a  written  instrument  in  which  a  person  or  firm  having 
money  in  a  bank  orders  the  bank  to  pay  a  certain  sum  to  a  certain  person,  or  his 
order,  or  to  the  bearer.     The  most  common  form  is  shown  in  illustration  2 la,  on 
the  next  page. 


BUSINESS  FORMS 


81 


FOURTH  NATIONAL  BANK 

//  /2^?^r^?^/ 


SAN  JOSE.  CALIF.. 


PAY   TO   THE   ORDER   OF 


DOLLARS 


No 


Illustration  2  la 

(B)  All  checks  received  must  be  indorsed  by  the  payee,  as  was  stated  in 
lesson  30,  before  they  can  be  cashed  at  the  bank.  There  are  several  kinds  of 
indorsement,  but  two  are  of  special  importance.  One  is  called  a  "blank" 
indorsement  and  the  other  a  "full"  indorsement.  The  following  illustration 
will  make  plain  the  difference  between  these  two  kinds  : 


Illustration  21b 

Suppose  John  Doe,  living  in  San  Jose,  Calif.,  owes  Richard  Roe  of  Clyde,  X.  D., 
§200.  He  writes  the  check  shown  as  illustration  21  a  on  the  Fourth  National 
Bank,  in  which  he  has  deposited  money,  and  sends  it  to  Richard  Roe,  who, 
upon  receiving  it,  writes  his  name  on  the  back  of  it,  as  is  shown  above  under 
blank  indorsement,  preparatory  to  cashing  it  at  the  State  Bank  of  Clyde,  with 
which  he  does  his  banking  business.  The  effect  of  this  blank  indorsement  is 
to  make  the  check  payable  to  bearer ;  that  is,  any  one  who  gets  possession  of  it. 


82  PRINCIPLES  OF  BOOKKEEPING 

It  will  be  readily  seen  that  this  is  not  the  safest  way  to  indorse.  If  Richard 
Roe  should  lose  the  check,  any  person  finding  it  could  cash  it  at  the  bank,  and 
Roe  would  lose  the  amount  unless  he  could  recover  it  from  the  dishonest  finder 
who  cashed  it.  If,  however,  Roe  had  indorsed  as  is  shown  under  full  indorse- 
ment, no  one  except  the  State  Bank  of  Clyde,  as  indorsee,  would  be  entitled 
to  the  check.  No  finder  could  cash  it  anywhere  without  first  getting  the 
signature  of  the  State  Bank  of  Clyde  to  whose  order  it  was  indorsed  by  Roe. 
This  kind  of  an  indorsement  is  called  a  "full"  indorsement  and  is  the  safest  one 
to  use  where  there  is  any  possibility  of  the  check  getting  into  the  hands  of  a  dis- 
honest person  not  the  rightful  holder.  Checks  and  notes  made  in  the  form 
illustrated  are  negotiable  and  may  be  passed  on  from  one  to  another  by  indorse- 
ment and  delivery,  or  by  delivery  only  after  being  indorsed  in  blank.  The  con- 
tract of  the  indorser  is  stated  in  lesson  30  (105),  and  this  contract  is  made  by 
every  regular  indorser  except  one  who  writes  "without  recourse"  over  his 
indorsement,  the  effect  of  which  is  to  relieve  the  indorser  of  that  part  of  the  con- 
tract which  provides  that  he  will  pay  the  amount  if  the  one  who  is  supposed  to 
do  so  does  not. 

(C)  The  rightful  holder  of  any  instrument  who  indorses  it  for  the  purpose 
of  passing  it  on  to  another  is  called  a  "regular"  indorser.  An  "irregular"  in- 
dorser is  one  who  is  not  a  party  to  the  original  instrument,  but  who  writes  his 
name  on  the  back  of  the  instrument  to  guarantee  that  it  is  properly  drawn ;  that 
there  are  no  defects  in  it  that  will  interfere  with  its  collection ;  that  all  signatures 
on  the  instrument  are  genuine  ;  that  the  parties  to  it  are  legally  competent  to  con- 
tract ;  and  that  if  it  is  not  paid  when  due  if  properly  presented  by  the  legal  holder, 
he,  the  indorser,  will  pay  it  if  he  receives  prompt  notice  of  its  non-payment. 

123. 'As  was  stated  in  a  previous  paragraph,  before  receiving  the  money  on 
any  check,  the  payee,  or  indorsee,  must  indorse  it,  and  thus  the  check  becomes  a 
good  receipt  for  the  payment  when  it  is  returned  by  the  bank  to  the  one  who 
drew  it.  To  improve  the  check  as  a  receipt,  a  brief  statement  as  to  what  the 
check  was  given  for  should  appear  on  its  face  under  the  amount  in  words  and 
near  the  lower  left-hand  corner.  If  an  invoice  is  being  paid  "Invoice  of  Apr.  1, 
'13"  will  be  sufficient.  Attach  the  canceled  check  to  the  invoice  and  file  to- 
gether. If  a  note  is  paid  by  check,  "Note  due  Apr.  1,  '13"  would  be  sufficient. 
A  check  for  groceries  might  have  this  memorandum :  "Groceries,  April,  1913." 
See  illustration  17,  page  70. 

124.  (A)  All  banks  have  money  deposited  in  New  York  City  banks  or  have 
connections  with  them  through  other  banks,  as  New  York  is  the  money  center 


BUSINESS  FORMS 


83 


of  the  United  States.  Banks  in  the  Middle  West  would  also  carry  an  account 
with  a  Chicago  bank.  There  are  many  local  banking  centers  in  a  country  as 
large  as  ours.  Since  New  York  City  is  our  greatest  money  center  and  the  only 
one  in  which  all  banks  in  other  cities  have  banking  connections,  it  will  be  used 
in  our  study  of  the  bank  draft, 

(B)  Horace  Stanford  lives  in  Elmira,  N.  Y.,  and  has  money  deposited  in  the 
Commercial  Bank  of  that  city.  He  desires  to  pay  $  100  to  D.  F.  Ward  of 
Portland,  Ore.  As  the  most  convenient  form  of  remittance  in  this  case 
would  be  a  New  York  bank  draft,  he  goes  to  the  Commercial  Bank  of  Elmira 
and  hands  the  proper  clerk  the  following  check : 


COMMERCIAL  BANK 

ELMIRA,  N.  Y. 


Pay  to  the  order  of 

(J~ 


Illustration  22 
(C)  A  ticket  like  the  following  is  filled  out  and  handed  to  the  clerk. 


191 


Requires  the  following  New  York  Drafts 


niustration  23 


84 


PRINCIPLES  OF  BOOKKEEPING 


(D)  The  following  draft  is  made  out  by  the  clerk,  signed  by  the  cashier,  and 
handed  to  Horace  Stanford  : 


COMMERCIAL  BANK 

ELM  IRA,  N.  Y. 


Pay  to  the 
Order  of 


Dollars 


To  Merchants  Bank, 

New  York  City 


(S 


Cashier 


Illustration  24a 


(E}  Since  this  draft  is  payable  to  Horace  Stanford,  or  his  order,  he  must 
indorse  it  before  sending  it  to  D.  F.  Ward.  For  reasons  given  in  paragraph  122 
($),  page  82,  he  indorses  it  in  "full,"  as  follows : 


Illustration  24b 

(F)  The  draft  is  now  sent  with  a  letter  to  D.  F.  Ward,  Portland,  Ore.,  who, 
when  it  is  received,  takes  it  to  the  Third  National  Bank  of  Portland,  where  he  has 


BUSINESS  FORMS  85 

an  account,  and  after  indorsing  it,  receives  cash  or  credit,  as  he  may  choose. 
Since  Ward  writes  his  indorsement  at  the  bank,  a  "blank"  indorsement  will 
be  satisfactory. 

(G)  The  Third  National  Bank  of  Portland  makes  no  charge  for  cashing  the 
draft,  because  it  also  has  money  on  deposit  in  some  New  York  bank  and  draws 
drafts  for  its  customers  against  its  New  York  account.  Every  day  it  is  necessary 
for  the  Third  National  to  send  money  or  its  equivalent  to  its  New  York  bank 
to  maintain  a  balance  in  its  favor  to  draw  on,  and  it  is  much  more  convenient 
and  safe  to  send  claims  on  New  York  banks  instead  of  money.  Therefore,  it 
is  glad  to  cash  all  the  New  York  drafts  it  can  get,  without  charge.  The  draft 
cashed  for  Ward  will  be  sent  to  the  Chemical  Bank  of  New  York  with  which 
the  Third  National  Bank  of  Portland  has  its  New  York  account ;  the  Chemical 
Bank  will  collect  the  amount  from  the  Merchants  Bank  and  credit  the  account 
of  the  Third  National  of  Portland ;  the  Merchants  Bank  will  deduct  the  amount 
from  the  balance  of  the  Commercial  Bank  of  Elmira  and  send  the  canceled  draft 
back  to  that  bank  to  be  kept  on  file. 

(H)  If  Horace  Stanford  had  not  required  that  the  draft  be  made  out  in  his 
own  favor  so  that  he  could  indorse  it  to  Ward,  the  canceled  draft  would  not  show 
that  Stanford  sent  it  to  Ward,  and  thus  it  would  be  less  valuable  as  a  receipt. 
At  any  time  Stanford  may  get  the  canceled  draft  from  the  Commercial  Bank, 
if  any  question  should  arise  as  to  whether  or  not  the  amount  owed  Ward  had  been 
paid. 

125.  (A)  Blank  receipt  books  can  be  purchased  of  any  stationer  at  small 
cost.  The  proper  form  of  a  receipt  is  as  follows : 


CQ   ^s/-    ,    *JT 

v-x^L.A-t  Ai^^^y^i^f^^^  Gg-/i 


RECEIVED  OF 

f— < 

,    .  *    X-*3       .  />  -J-  4*  *    Cf 

DOLLARS 


x/  ^j  2-  y-  _/  ^ 

^L^L, —   jsfsf.—*'     ^f^sf2s:f^^f?^^^3'^>Sf     _^-^^-^ — _^*^L^*&?^>sf-*&* 


Illustration  25 


86  PRINCIPLES  OF  BOOKKEEPING 

(5)  While  a  receipt  is  not  positive  proof  of  payment,  it  is  strong  evidence 
and  one  should  be  demanded  whenever  debts  are  paid  in  currency.  When 
checks  are  used,  no  receipts  are  necessary  if  the  directions  given  in  paragraph  123 
are  followed. 

126.  (.4)  A  contract  is  an  agreement  between  two  or  more  competent  persons 
to  do  or  not  to  do  some  lawful  thing  for  a  consideration,  or  in  writing  under  seal. 

(J5)  No  special  formality  is  necessary  except  in  a  few  cases  which  come  under 
a  law  known  as  the  statute  of  frauds,  requiring  that  there  must  be  written  evi- 
dence in  the  following  contracts  : 

1 .  Those  in  which  one  person  agrees  to  be  responsible  for  the  debt  or  action 
of  another. 

2.  Those  in  which  an  administrator  or  executor  promises  to  be  personally 
responsible  for  a  debt  of  the  estate  he  is  settling. 

3.  Any  contract  made  in  consideration  of  marriage  except  mutual  promises 
to  marry. 

4.  Any  contract  for  the  sale  of  lands,  or  any  interest  in  or  concerning  them. 

5.  Any  contract  which  by  its  terms  could  not  be  carried  out  within  the  space 
of  one  year  from  the  date  of  making. 

6.  Contracts  for  the  sale  of  personal  property,  such  as  goods  or  merchandise 
above  a  certain  value  (from  $30  to  $200,  according  to  the  laws  of  the  different 
states)  unless  some  or  all  of  the  goods  be  delivered  and  accepted ;  or  all  or  part 
of  the  purchase  price  be  paid. 

Practically  all  other  contracts  may  be  made  orally,  but  since  it  is  often  diffi- 
cult to  prove  an  oral  contract,  the  written  one  is  recommended  whenever  possible. 
(C)  The  following  simple  wording  may  be  used  in  any  ordinary  contract : 


This  agreement  made  this  first  day  of  June,  1913,  between  H.  R.  Chase  of 
Geneseo,  N.  Y.,  and  George  Strong  of  the  same  place,  provides  as  follows  : 

That  H.  R.  Chase  agrees  to  work  for  George  Strong  one  year,  as  farm 
manager,  for  a  monthly  salary  of  One  Hundred  Dollars ;  and  that  he  will  begin 
his  term  of  service  on  June  15,  1913  ;  and,  further,  that  George  Strong  agrees  to 
pay  H.  R.  Chase  the  above  salary  for  services  as  manager  of  his  farm,  and  that 
said  salary  shall  be  payable  semi-monthly  on  the  1st  and  15th  of  each  month. 

H.  R.  CHASE. 
GEORGE  STRONG. 


BUSINESS  FORMS 


87 


Such  contracts  should  be  made  in  duplicate,  one  copy  being  kept  by  each  party. 
The  practice  of  making  a  written  and  signed  memorandum  of  each  agreement 
entered  into  should  be  early  established.  It  will  save  many  dollars  and  much 
trouble  and  amply  repay  the  little  effort  necessary  to  do  the  writing.  Ink  should 
be  used  when  possible,  but  indelible  pencil  will  answer  quite  as  well  and  will  often 
be  more  convenient. 

OFFICE  EQUIPMENT 

127.  (A}  It  is  not  necessary  that  an  elaborate  office  be  maintained  by  a 
farmer,  but  there  are  a  few  conveniences  that  will  go  far  toward  making  it  pos- 
sible to  put  the  farm  upon  a  business  basis. 


Illustration  26 

(5)  A  desk,  with  drawer  space,  filing  space,  and  safe  combined  is  not  very 
expensive  and  should  be  in  the  home  of  every  up-to-date  farmer. 

(C)  A  simple  box  file  like  illustration  27  can  be  secured  of  any  stationer. 
It  contains  alphabetical  divisions  and  can  be  used  for  filing  receipts,  receipted 
bills,  canceled  checks,  etc.  A  separate  one  should  be  provided  for  letters. 
Before  a  letter  requiring  a  reply  is  filed,  a  memorandum  of  the  reply  should 
be  made  on  the  back.  This  should  be  brief.  If  the  typewriter  is  used,  a  carbon 
copy  can  be  made  and  attached  to  the  letter  for  filing. 


88 


PRINCIPLES  OF  BOOKKEEPING 


(D)  A  deep  drawer  in  the  desk,  illustration  26,  contains  a  complete  outfit 
for  filing  all  kinds  of  papers  according  to  the  most  improved  business  methods 
and  should  be  used  instead  of  the  box  files,  if  such  a  desk  is  used. 


Illustration  27 


WRITTEN  EXERCISES 

A.  Write  a  proper  form  of  invoice  for  your  father's  farm  or  other  business. 

B.  Make  out  an  invoice  for  four  items  of  farm  produce,  sold  by  you,  showing 
all  the  necessary  information. 

C.  Suppose  the  invoice  called  for  in  B  is  paid  to-day.     Receipt  it. 

D.  Make  out  the  check  used  to  pay  the  invoice  called  for  in  B.     Supply 
the  name  of  the  bank. 

E.  You  owe  James  Rollins  $50  more  than  the  amount  of  the  check  re- 
ceived above.     You  wish  to  pay  the  debt  by  transferring  this  check  to  James 
Rollins  and  by  giving  your  own  check  for  the  balance.     Take  the  necessary 
steps  to  make  the  payment. 

F.  You  wish  to  pay  $  100  to  Richard  Roe,  who  lives  in  a  city  about  200 
miles  from  your  home.     (Use  any  city.)     A  bank  draft  is  preferable  for  such  a 
remittance.     Draw  the  check  necessary  to  purchase  one  at  College  National 
Bank,  where  you  have  money  on  deposit. 


REVIEW  QUESTIONS  89 

G.  Trace  the  bank  draft  until  it  is  returned  to  the  College  National  Bank 
of  your  place. 

H.  Henry  Watson  owes  you  $59.60  and  he  has  paid  you  in  currency.  Write 
a  receipt. 

7.  Your  father's  grocery  bill  at  Brown  &  Co.'s  grocery  for  the  current  month 
is  $  18.50.  He  asks  you  to  write  a  check  on  College  National  Bank  to  pay  this 
bill.  Write  one  that  will  be  a  good  receipt  when  canceled.  Your  father  will 
sign  the  check  after  you  have  written  it. 

J.  Your  father  has  been  asked  to  plant  sweet  corn  for  the  Excelsior  Canning 
Co.  of  your  place  on  the  following  conditions  :  He  is  to  plant  10  acres ;  care  for 
it  properly ;  harvest  it ;  and  draw  it  to  the  canning  factory  when  required  to  do 
so  by  the  factory.  It  is  to  be  weighed  at  the  factory  and  paid  for  in  cash  at  the 
rate  of  $  8  per  ton.  Draw  up  a  suitable  contract. 

LESSON  35 

REVIEW   QUESTIONS 

ON  LESSON  34 

119.  What  business  forms  should  every  business  man  be  familiar  with  ? 

120.  (A)  What  is  an  invoice  ?     (B)  Is  it  necessary  to  have  printed  invoice 
blanks  ? 

120.  (C)  What  are  sales  slips  and  how  are  they  used  ? 

120.  (D)  What  should  be  done  with  an  invoice  when  it  is  returned  with  a 
remittance  ? 

122.  (A)  What  is  a  check  ? 

122.  (B)  What  must  be  done  before  checks  received  can  be  deposited  ? 

122.  (5)  What  is  a  "blank"  indorsement  ?    A  "full"  indorsement  ? 

122.  (J?)  What  is  the  danger  in  the  use  of  the  blank  indorsement  ? 

122.  (B)  How  may  checks  be  passed  on  from  one  to  another  ? 

122.  (5)  What  is  the  effect  of  writing  "without  recourse"  over  an  indorse- 
ment? 

122.  (C)  Distinguish  between  "regular"  and  "irregular"  indorser. 

123.  What  should  be  done  to  make  the  canceled  check  a  good  receipt  ? 

124.  (A)  Why  is  a  New  York  City  bank  used  in  the  study  of  a  bank  draft  ? 
124.  (D)  What  is  a  bank  draft  ? 

124.  (H}  In  whose  favor  should  a  New  York  draft  be  made  out  ?     Why  ? 


90 


PRINCIPLES  OF  BOOKKEEPING 


124.  (H)  If  at  any  time  a  dispute  should  arise  about  an  amount  paid  by  a 
bank  draft,  what  can  the  one  who  sent  it  do  ? 

125.  (A)  Are  receipt  blank  books  easily  obtained  ? 

125.  (B)  Is  a  receipt  proof  of  payment  ?     What  is  it  ?     Should  receipts 
always  be  insisted  upon  by  one  who  is  paying  a  debt  ? 

126.  (A)  What  is  a  contract  ? 

126.  (B)  Is  any  special  form  of  contract  usually  required  ?  What  contracts 
must  have  some  written  evidence  ? 

126.  (C)  Why  should  contracts  be  made  in  duplicate  ?  What  may  be  used 
as  a  convenient  substitute  for  pen  and  ink  in  making  contracts  ? 


FARM   ACCOUNTS 

FARM   SET   I 

LESSON  36 
INVENTORY 

The  father  of  George  Enterprise,  a  mechanic  in  a  small  Middle  Western  town, 
was  earning  an  average  of  fifty  dollars  a  month  at  his  trade.  He  was  born  and 
brought  up  on  a  farm  of  160  acres,  of  which  he  inherited  forty.  He  has  now 
decided  to  take  up  intensive  farming,  specializing  in  pure-bred  cattle,  poultry, 
potatoes,  strawberries,  and  blackberries. 

He  has  an  opportunity  to  buy  the  entire  equipment  of  a  neighbor  who  is  retir- 
ing. His  savings  are  such  that  after  paying  for  the  farm  equipment  and  house- 
hold goods,  he  has  a  balance  of  $  125,  including  $20  due  him  from  a  neighbor. 
The  local  Farmers'  Cooperative  Credit  Association  holds  a  mortgage  of  $2000 
against  the  property. 

George,  his  sister  Edith,  and  Mrs.  Enterprise  will  care  for  the  chickens  and 
do  a  little  work  occasionally  in  the  garden.  For  this  the  household  will  receive 
eggs,  poultry,  garden  produce,  and  the  dairy  products  from  one  cow.  Whenever 
Mrs.  Enterprise  needs  it,  cash  not  to  exceed  $  100  is  to  be  paid  to  her  for  the 
services  of  herself  and  children. 

Since  Mr.  Enterprise  could  return  to  town  and  resume  his  former  occupation 
at  $  50  a  month,  he  decides  to  draw  $150  quarterly,  and  out  of  this  he  will  pay 
the  household  as  well  as  his  personal  expenses.  Upon  careful  estimates,  he 
decides  to  charge  60  per  cent  of  the  salary  to  crops,  20  per  cent  to  live  stock, 
10  per  cent  to  general  expenses,  and  10  per  cent  to  general  repairs. 

The  household  accounts  are  kept  by  Edith  on  the  form  used  in  lesson  4, 
strictly  separate  from  the  business  accounts. 

Before  beginning  his  first  year's  business,  Mr.  Enterprise  prepares  his  first 
financial  statement,  which  he  enters  in  the  day  book  with  a  suitable  explanation 
as  follows : 

91 


92 


FARM  ACCOUNTS 


FINANCIAL  STATEMENT  No.  1,  ENTERPRISE  FARM* 
APRIL  1,  1911 


RESOURCES : 

Real  estate,  40  acres  at  $  200 
Produce 

Potatoes,  35  bu.  at  60  jf. 

Hay,  10  T.  at  $  7 
Horses  and  cattle 

2  Horses  at  $  100. 
1  Mare 

1  Colt  over  1  year 

1  Colt  under  1  year 

3  Cows  at  $  100,  over  2  years 
3  Heifers  over  1  year,  at  $  75 

2  Calves,  under  1  year,  at  -1 

1  Bull 
Poultry 

50  Plymouth  Rocks  at  $1 
Implements 
Potato  planter 
Potato  digger 
Walking  weeder 
14-inch  plow 
2-section  harrow 
Wagon  (old) 
Delivery  wagon 
Road  wagon  (old) 
Mower 

2  Hay  rakes 
Manure  spreader 
Platform  scales 
Cultivator 
Hand  tools 
Harness 


$21. 
70. 

200. 
200. 
125. 

50. 
300. 
225. 

80. 

50. 


52. 
67. 
15. 
14. 
10. 
35. 
20. 
40. 
45. 
35. 
100. 
16. 
17. 
8. 
26. 


91. 


1230. 
50. 


500. 


1  Part  of  this  statement,  as  well  as  the  plot,  page  95,  are  from  U.  S.  Farmers'  Bulletin 
No.  325,  entitled  "Small  Farms  in  the  Middle  West,"  by  J.  A.  Warren. 


INVENTORY  93 

Cash  on  hand  and  in  bank  55. 

Accounts  and  bills  receivable  15. 

LIABILITIES  : 

Mortgage  favor  Farmers'  Coop.  Credit  Association,  due 

October  1,  1919  $2000. 

SUMMARY 
Real  estate  $8000. 

Crops  91. 

Horses  and  cattle  1230. 

Poultry  50. 

Implements  500. 

Cash  55. 

Accounts  receivable  15. 

Total  9941. 

Less  liabilities  2000. 

Net  worth  $7941. 

During  the  first  year  Mr.  Enterprise  kept  only  a  day  book,  in  which  he 
recorded,  not  only  his  receipts  and  payments,  but  any  data  which  would  be  of 
interest  and  value  in  the  future. 

At  the  end  of  the  first  year,  March  31,  1912,  he  took  another  inventory. 

WRITTEN  EXERCISE 

The  student  will  now  prepare  the  second  financial  statement  in  exactly  the 
same  form  as  the  first  from  the  data  given  below,  and  also  prepare  the  state- 
ment of  profit  and  loss,  as  outlined  under  paragraph  40.  Two  pages  of  journal 
paper  will  be  required. 

FINANCIAL  STATEMENT  No.  2,  ENTERPRISE  FARM 

APRIL  1,  1912 
RESOURCES : 

40  acres  land  @  $200;  40  bu.  potatoes  @  60ff ;  15  T.  hay  @  $7;  2  horses 
@  $100;  1  mare,  $200;  1  colt,  over  1  year,  $150;  1  colt,  $75;  3  cows,  over 
2  years,  at  $100 ;  3  heifers,  over  1  year,  @  $75 ;  3  calves,  under  1  year,  @  $40 ; 

1  bull,  $100;  60  Plymouth  Rock  chickens©  $1;  potato  planter,  $50;  potato 
digger,  $63;  walking  weeder,  $13;  14-inch  plow,  $13;   2-section  harrow,  $9; 
wagon  (old),  $30;  delivery  wagon,  $18;   road  wagon  (old),  $36;  mower,  $40; 

2  hay   rakes,    $  25 ;    manure   spreader,    $  90 ;    platform    scales,    $  15 ;    culti- 


94  FARM  ACCOUNTS 

vator,  $15;  tools,  $10;   harness,  $22;  buggy,  $100;  cash  and  in  bank,  $105; 
accounts  and  bills  receivable, 


LIABILITIES  : 

Mortgage  favor  Farmers'  Cooperative  Credit  Association,  due  October  1, 
1919,  $1700. 

SUMMARY 

Real  estate 

Crops 

Horses  and  cattle 

Poultry 

Implements 

Cash 

Accounts  receivable 

Total 

Less  liabilities 
Net  worth 

You  will  notice  that  he  revalued  each  article  wherever  a  change  occurred 
both  as  to  reduction  (depreciation)  and  increase  (appreciation)  of  value.  This 
subject  is  discussed  fully  in  lessons  44  and  48. 

The  proprietor  is  now  able  to  find  the  general  result  of  the  year's  work,  as 
follows : 

STATEMENT  OF  PROFIT  AND  Loss,  YEAR  ENDED  MARCH  31,  1912 
Net  worth  now 
Net  worth  last  year 
Profit 
Less  salary 

6  per  cent  interest  on  investment 
Net  profit 

This  kind  of  bookkeeping  is  better  than  none  at  all,  but  Mr.  Enterprise  now 
decides  to  install  a  complete  but  simple  set  of  books,  especially  suited  to  the 
farming  business.  George  has  mastered  this  system  in  the  public  schools,  and  it 
is  agreed  that  he  will  keep  the  books  for  $  5  per  month  and  5  per  cent  of  the  net 
annual  profits  of  the  business.  The  $  5  is  to  be  paid  out  of  the  monthly  wages 
of  Mr.  Enterprise,  and  the  share  in  the  profits  is  to  be  paid  after  the  yearly  finan- 
cial statement  has  been  made. 


FARM   PLOT 


95 


LESSON   37 
THE  FARM  PLOT 

Mr.  Enterprise,  being  a  progressive  farmer,  has  decided  on  a  definite  scheme 
of  rotation  of  crops  for  the  purposes  of  maintaining  the  fertility  of  the  soil ;   of 


N 

Field  No.  3    4%  A. 

10O8              Grain, 
lOO'J 
191O              Potatoes 

ion 

1912              Grain 

Field  No.  2    4s/4  A. 

19OS            Potatoes 
19O9            Grain 
191O 
1911              Potatoes 
1912 

T 
Field  No.  4    4%  A. 

19O8              Grain 
19O9              Potatoes 
1910 
1911             Grain 

1912 
J, 

Field  No.  1    4%  A. 

19OS             Potatoes 
19O9 
191O              Grain 
1911 
1912              Potatoes 

Alfalfa                   2  A. 

11  A, 

% 
h 

S          Orchard 

9 

BH 

_r~L 

stock       u°use  y 

Pastures 

i*AA. 

Alfalfa                     Garden  & 
Small  Fruits 

Game 

S 
Illustration  28 

securing  the  proper  quantity  and  the  right  proportion  of  feed  for  his  stock ;  of 
keeping  the  soil  in  good  physical  condition,  thereby  reducing  labor;  and  of  so 
arranging  the  crops  that  the  labor  will  be  as  evenly  distributed  as  possible 
throughout  the  growing  season.  In  order  to  realize  this  he  has  kept  a  rough  dia- 
gram of  the  farm,  as  shown  in  illustration  28.  In  order  to  keep  the  plots  in  per- 


96 


FARM  ACCOUNTS 


manent  form,  he  now  requests  George  to  draw  the  plot  to  scale,  four  times  the  size 
of  the  figure  in  the  book.  Having  done  this,  he  can  trace  the  outline  with  the  aid 
of  carbon  paper  and  secure  two  or  three  copies  at  a  time.  (Typewriter  carbon 
paper  should  be  used  to  prevent  blurring.)  It  is  his  intention  to  preserve  these 
plots  as  permanent  records  of  his  farm  operations.  The  reasons  for  another 
arrangement  of  the  fields  are  interestingly  explained  in  Farmers'  Bulletin  No.  325. 

WRITTEN  EXERCISE 

Reproduce  the  figure,  illustration  28,  page  95,  to  four  times  its  size.  Each 
line  in  the  figure  will  be  exactly  double  in  length.  You  will  find  that  the  figure 
is  drawn  to  a  scale  of  1  inch  =  1  chain  =  330  feet.  First  outline  the  work  in 
pencil,  then  trace  it  in  ink.  Practice  lettering  until  you  can  very  nearly  repro- 
duce the  lettering  in  the  figure.  Hand  in  your  work  for  approval. 


THE  CONTINUOUS  ANNUAL  STATEMENT 

In  order  to  be  able  to  compare  the  several  items  of  the  inventory  from  year 
to  year,  to  guard  against  omissions  and  mistakes,  and  to  save  labor,  Mr.  Enter- 
prise and  George  decide  to  arrange  the  two  preceding  statements  in  the  contin- 
uous form  and  to  allow  a  column  for  the  inventory  at  the  end  of  the  present  year. 


\\o.        Y9U 


\Vo 


\9\1v 


2-      2-00  2-      2-00 

Illustration  29a 


CONTINUOUS  ANNUAL  STATEMENT 


97 


- 


*:z^?T^2A-t^d^0-^^ 


</  /  0  0  0 


Illustiation  29b 


98 


FARM  ACCOUNTS 


I 


u        * 

'         <^ 


CASH  BOOK 


99 


'5 


3 


100  FARM  ACCOUNTS 

WRITTEN  EXERCISE 

Arrange  the  statements  given  as  Financial  Statement  No.  1,  and  Financial 
Statement  No.  2,  in  tabular  form  like  illustrations  29  a  and  29  b,  on  pages  96 
and  97.  Two  pages  of  journal  paper  will  be  required.  Rule  an  additional 
money  column  to  the  left,  as  shown  in  illustration  29  a. 

OPTIONAL  EXERCISES 

A.  It  is  suggested  that  the  student  prepare  an  inventor}^  of  his  father's  farm, 
or  other  business,  and  bring  it  to  the  class  for  discussion.     Special  credit  will  be 
given  for  the  work. 

B.  On  a  form  similar  to  the  one  used  in  lesson  36,  prepare  a  statement  of 
your  father's  farm  for  a  convenient  period.     Ask  your  parents  to  help  you. 

C.  Draw  a  plot  of  your  home  farm,  if  you  live  on  a  farm,  and  bring  it  to  the 
class  for  discussion  and  credit. 

LESSON  38 
THE  CASH  BOOK 

The  student  is  already  familiar  with  the  special  column  cash  book.  The 
same  form  is  used  as  in  lessons  3  and  4  with  different  headings. 

The  several  headings  in  illustration  30,  pages  98  and  99,  are  self-explana- 
tory. Under  Crop  Receipts  are  entered  sales  of  everything  produced  from  the 
soil ;  hides,  hair,  extra  labor  by  the  horses,  as  well  as  sale  of  animals  are  entered 
under  Horses  and  Cattle ;  while  under  Poultry  are  entered  the  sales  of  eggs,  fowls, 
feathers,  etc.  Under  Crop  Payments  are  entered  everything  which  directly 
increases  the  cost  of  crops,  such  as  seeds,  fertilizers,  labor,  etc.  The  same  is 
true  of  Horses  and  Cattle,  and  Poultry.  Real  Estate  includes  the  land,  build- 
ings, fences,  and  all  permanent  improvements,  but  not  repairs  or  replacements; 
under  Implements  are  included  all  new  machinery  and  tools  not  previously 
included  in  the  inventory,  but  not  repairs  or  replacements;  parts  of  machinery 
are  entered  under  Repairs;  so  are  replacements  of  buckets,  tools,  etc.,  which 
were  broken  since  the  last  inventory.  The  remaining  columns  need  no  ex- 
planation. 

All  payments  are  made  by  check,  the  first  number  being  50.  Ordinarily  the 
bank  book  is  balanced  at  the  end  of  each  month,  but  in  this  exercise  it  will  be 
proved  only  twice  during  the  year. 


CASH  BOOK  101 

CASH  BOOK,  1912-1913 

April       1  —  Cash  and  in  bank,  $105;  accounts  and  bills  receivable  (Sundries), 

$20 ;  sold  2  horses  @  $  100  each  to  P.  O.  Williams. 
5  — Paid  J.  K.  Gill  Co.,  for  stationery,  $3;    desk,  $50;    paid  E.  M. 

Turner  for  Mare  "Fannie,"  3-yr.,  $200. 
20  —  Paid  Edw.  Knowles  for  repair  of  implements,  $3.20. 
30  — Sold  19  settings  of  eggs  during  April  @$2.00;  paid  E.  F.  Russel 
for  breaking  colts,  $15;    paid  Farmers'  Coop.,  chicken  feed, 
$12. 

May       2  —  Paid  E.  B.  Jones  for  spraying  outfit,  $25 ;  forge  and  tools,  $15. 
9  —  Sold  calf,  $25 ;  garden  truck,  $  18. 
16  —  Sold  old  wagon,  $35;   paid  Dr.  E.  Hancock,  veterinary  service, 

$5 ;  paid  J.  R.  Smith  &  Co.,  for  1  road  wagon,  $60. 
23  —  Paid  E.  B.  Brown,  for  labor  in  garden,  $15 ;  drew  for  private  use, 

$10. 

30  —  Sold  36  settings  of  eggs  during  May  @  $2. 
June       2  —  Sold  1500  Ib.  strawberries  @  5  i  to  John  Brown. 

9  —  Paid  Farmers'  Coop,  for  200  bu.  corn  for  poultry  @  38  £  bu. 
16  —  Paid  Farmers'  Coop,  for  20  bu.  wheat  @  75  i  for  poultry ;    paid 

Breeden  Implement  Co.,  parts  for  mower,  $5.40. 
23  —  Sold  1000  Ib.  strawberries  @  5  i  to  E.  Horning. 
30  —  Sold  12  settings  of  eggs  during  June  @  $2 ;  paid  salary  for  April, 
May,  and  June,  $150.      For  distribution  of  salary,  see  page  91. 
July        5  —  Sold  2-year  colt  to  R.  E.  Evans,  $  150 ;    sold  38  cockerels  @  $  1.50. 
10  — Paid  R.  M.  Jones  for  2  calves  @  $50;   paid  E.  R.  Travers  for 

pasture,  $20  (crops). 
15  —  Sold  1450  Ib.  blackberries  @  5  i. 
25  —  Paid  Edward  Fulton  for  painting  and  papering  dwelling,  $100; 

paid  Steiner  Brothers  for  horseshoeing,  $5. 
Aug.       4  —  Sold  1  cow  to  Robert  Johnson,  $  100 ;  paid  E.  B.  King  for  1  heifer, 

$40;  paid  County  Development  League  subscription,  $10. 
Sept.     19  —  Sold  1500  bu.  potatoes  @  65  i  to  Farmers'  Coop. 

30  —  Salary  for  July,  August,  and  September,  $150. 

The  student  will  now  total  all  the  columns  and  prove  in  the  usual  manner. 
All  cash,  except  the  $20  owing  and  $20  in  cash  drawer,  has  been  deposited. 
He  will  also  prepare  a  cash  statement  like  the  following : 


102  FARM  ACCOUNTS 

CASH  STATEMENT,  SEPTEMBER  30,  1912 
RECEIPTS 

Balance  on  hand  April  1  (including  Accts.  Rec.)  - 
Crops 

Horses  and  cattle 
Poultry 
Implements 
Total 


PAYMENTS 

Crops 

Horses  and  cattle 
Poultry 
Implements 
General  expenses 
Repairs 

Personal  (above  salary) 
Office  desk 
Total 
Balance  (in  drawer,  $20;  owing,  $20;  in  bank,  $20). 

George  now  checks  up  the  bank  pass  book.  He  finds  that  all  the  canceled 
checks  are  returned  except  those  in  favor  of  E.Travers,  Steiner  Bros.,  and  County 
Development  League.  The  bank  book  balance  is  $956.90.  Is  this  correct  ? 

The  pass  book  is  proved  as  follows : 

Our  balance  (Check  book  stub)  ? 

Check  No.  65  ? 

Check  No.  67  ? 

Check  No.  68  ? 


Bank  balance  $956.90 

CASH  BOOK  —  Continued 

Oct.        1  — Paid  on  mortgage  favor  Farmers'  Credit  Assn.,  $400;  paid  inter- 
est on  $1700  @  5  per  cent  for  1  yr.,  $85. 
1  — The  $20  owing  April  1  has  been  paid.      (No  entry  is  necessary  as 

this  amount  was  entered  as  cash  April  1.) 
15  —  Paid  Roy  Rudolph  and  Geo.  Andrews  for  picking  potatoes, 


CASH  BOOK  103 

Oct.      25  —  Sold  500  bu.  potatoes  @  65  jf . 

Nov.       4  — Paid  Chas.  Heckert  for  remodeling  dwelling,  $400.     (Real  Estate, 
$300;  Repairs,  $100.) 

10  —  Drew  for  family  service,  $  100.      (The   family    has   lived    com- 

fortably on  the  monthly  salary  and  the  produce.  According  to 
agreement,  this  amount  is  now  drawn  to  apply  on  the  payment  of 
a  piano  purchased  to-day  for  $300.  Drew  for  personal  expenses, 
$25.) 

25  —  Paid  L.  R.  Steiner  for  repairing  fences,  $16. 

Dec.       5  —  Paid  Farmers'  Coop.,  for  100  bu.  corn  @  38^  for  poultry. 

15  —  Paid  Farmers'  Ins.  Co.  for  insurance  premium  for  3  yr.,  $24. 

26  —  Paid  H.  K.  Abraham  for  improvements  on  barn,  $  100. 

29  —  Sold  2  yearling  calves  to  E.  K.  Bryson  @  $80. 

30  —  Subscription  to  agricultural  magazines,  $2.45;  salary  for  October, 

November,  and  December,  $150. 
Jan.        2  —  Paid  John  Davis  for  1  cow,  $70. 

11  —  Paid  A.  K.  Abraham  for  general  repairs,  $15. 
25  —  Sold  2  heifers  to  Roy  McDonald  @  $75. 

Feb.      15  —  Paid  J.  B.  Kingdon  for  20  Ib.  alfalfa  seed  @  35  £ ;  10  Ib.  clover  seed 

@  45<£;  60  bu.  seed  potatoes  @  $1.50. 
28  —  Sold  10  settings  of  eggs  during  February  @  $1.50. 
Mar.       3  —  Paid  County  Treasurer  for  taxes  for  1912,  $45. 

16  — Sold  2-yr.  old  colt  to  John  Edwards,  $150;   sold  1  cow  to  E.  G. 

Strahorn  (^  in  30  days,  balance  in  cash),  $100. 

30  —  Sold  16  settings  of  eggs  in  March  @  $1.50;  membership  dues, 
State  Breeders'  Assn.,  $5  (Horses  &  Cattle) ;  salary  for  January, 
February,  and  March,  $  150. 

The  student  will  now  total  all  the  columns  and  prove  in  the  usual  manner. 
Remember  that  the  $50  entered  as  cash  Mar.  16  is  still  owing.     The  cur- 
rency on  hand  is  $5.     All  cash,  except  these  two  amounts,  has  been  deposited 
in  the  bank.     The  bank  book  balance  is  $228.95. 

Prove  the  bank  book  in  the  same  manner  as  on  Sept.  30.     The  outstanding 
checks  are : 

County  Treasurer,  and 
Salary  for  January,  February,  and  March. 
Check  the  results  with  your  instructor. 


104  FARM  ACCOUNTS 

LESSON  39 
THE   FINANCIAL   STATEMENT 

The  Annual  Statement  consists  of  three  parts  :  (1)  A  Summary  of  Cash  Re- 
ceipts and  Payments;  (2)  A  Statement  of  Resources  and  Liabilities;  and  (3) 
An  Analysis  and  Summary  of  the  Profits  and  Losses. 

Part  (1)  is  taken  directly  from  the  columns  in  the  cash  book;  part  (2)  is 
the  inventories  and  other  items  making  up  the  resources  and  liabilities ;  and  part 
(3)  is  made  up  of  parts  (1)  and  (2)  combined. 

The  statement  is  fully  discussed  in  lessons  7  and  14. 

WRITTEN  EXERCISE 

The  student  will  now  prepare  the  annual  statement  in  the  order  indicated  in 
the  last  paragraph. 

(1)  Cash  Statement  like  form  below. 

(2)  Resources  and  Liabilities.     Insert  the  data  given  on  page  105  in  the 
third  column,  provided  in  the  Continuous  Inventories  sheet.     See  illustrations 
29  a  and  29  b. 

(3)  The  Analysis  of  Profits  and  Losses  is  prepared  by  filling  out  the  form  given 
on  page  106. 

CASH  STATEMENT,  APRIL  1,  1913 

RECEIPTS 

Balance  on  hand  and  owing  April  1,  1912 
Crops 

Horses  and  cattle 
Poultry 

Implements  sold 
Total 

PAYMENTS 

Crops 

Horses  and  cattle 

Poultry 

Real  estate  (improvements) 

Implements 

Int.,  ins.,  and  taxes 


FINANCIAL  STATEMENT  105 


General  expenses 

Repairs 

Household  (above  salary) 

Personal  (above  salary) 

Office  desk 

Bills  payable 

Balance  on  hand  (currency,  $—  — ;  bank,  $- 

Accounts  receivable 

Total 


FINANCIAL  STATEMENT  No.  3,  ENTERPRISE  FARM 

APRIL  1,  1913 
RESOURCES : 

40  acres  land  @  $210 ;  25  bu.  potatoes  @  70  £ ;  5  T.  hay  ©  $8 ;  2  mares  © 
$200;  1  colt  over  1  yr.  @  $150;  2  colts  under  1  year  @  $75;  5  cows  over  2 
years©  $80;  2  heifers  ©  $75;  4  calves  under  1  year  @  $35;  bull,  $100; 
70  Plymouth  Rock  chickens  ©  $  1 ;  potato  planter,  $  45 ;  potato  digger,  $  60 ; 
walking  weeder,  $11  ;  14-inch  plow,  $10;  2-section  harrow,  $8;  wagon  (old), 
$28;  delivery  wagon,  $16;  road  wagon  (new),  $60;  mower,  $36;  2  hay  rakes 
$23;  manure  spreader,  $80;  platform  scales,  $14;  cultivator,  $13;  tools, 
$9;  harness,  $20;  buggy,  $90;  spraying  outfit,  $25;  forge  and  tools,  $15; 
cash  and  bank,  $38.95 ;  accounts  and  bills  receivable,  $50. 

LIABILITIES  : 

Mortgage  favor  Farmers'  Coop.  Credit  Assn.,  due  October  1, 1919,  $  1300. 

SUMMARY 
Real  estate 
Crops 

Horses  and  cattle 
Poultry 
.  Implements 
Office  desk 
Cash 
Accounts  receivable 

Total  resources 
Less  liabilities 

Net  worth 


106  FARM  ACCOUNTS 

ANALYSIS  OF  PROFITS  AND  LOSSES 

CROPS  COST  RETURNS 

Inventories  1912-1913 
Cash  payments 
Cash  receipts 
Profit 

HORSES  AND   CATTLE 

Inventories  1912-1913 

Payments 

Receipts 

Profit 

POULTRY 

Inventories  1912-1913 

Payments 

Receipts 

Profit 

IMPLEMENTS 

Inventories  1912-1913 

Payments 

Receipts 

Loss  (depreciation) 


SUMMARY  OF  PROFITS  AND  LOSSES 

LOSSES  PROFITS 


Crops 

Horses  and  cattle 
Poultry 
Implements 
Int.,  ins.,  and  taxes 
General  expenses 
Repairs 

Household  (above  salary) 
Personal  (above  salary) 
Net  profit 
Total 
Rate  of  profit  =  N.  P.  4-  N.  W.  1912  =  --.--% 


FARM  ACCOUNTS  WITH  PERSONS  107 

PROOF 


Net  worth  as  per  inventory,  1913 
Net  worth  as  per  inventory,  1912 
Net  profit 


LESSON  40 
FARM  ACCOUNTS  WITH  PERSONS 

Farming  may  be  regarded  as  a  strictly  cash  business.  The  sales  are  com- 
paratively few  and  far  between  and  the  store  accounts  are  usually  settled  at 
regular  intervals.  Exchanges  of  farm  produce  for  merchandise  should  be  re- 
garded as  cash  transactions;  the  sale  of  produce  for  cash,  and  the  purchase 
of  merchandise  for  cash.  This  will  insure  the  proper  record  in  the  cash  book. 

It  is  true,  however,  that  every  farmer  will  have  a  limited  number  of  personal 
relations  which  require  memorandum  accounts.  This  is  especially  true  of  dairy- 
men, truck,  and  -fruit  farmers,  whose  customers  may  prefer  to  run  an  account  by 
the  month  or  week.  In  such  cases,  it  is  often  convenient  to  use  tickets  or  coupons 
of  even  amounts  of  $  1,  $5,  or  $  10,  and  sell  them  for  cash  at  a  small  discount. 

Many  short  account  systems  for  petty  personal  accounts  are  now  in  use,  all 
having  for  their  object  the  elimination  of  useless  work  in  this  class  of  accounts. 
One  is  the  use  of  counter  books,  which  give  a  carbon  copy  with  each  original. 
One  slip  is  given  to  the  customer  and  the  other  is  kept  as  a  temporary  account. 
Since  settlement  is  generally  made  once  a  month,  it  is  useless  to  bring  these 
personal  accounts  into  the  general  books.  Where  such  accounts  are  numerous 
at  the  time  of  inventory,  their  sum  is  usually  regarded  as  a  part  of  the  inventory. 
But  where  they  are  few,  such  as  in  farming,  they  may  as  well  be  entered  at  once 
as  cash  and  the  due  bill  kept  as  a  part  of  the  cash  balance.  If  only  part  payment 
is  made,  make  a  memorandum  on  the  bill.  When  paid  in  full,  the  bill  is  either 
given  the  customer  properly  receipted,  or  destroyed. 

Where  it  is  desired  to  keep  a  permanent  record  of  accounts  with  persons, 
it  is  convenient  to  use  an  ordinary  day  book  with  journal  ruling.  The  left 
column  is  used  as  the  debit,  and  the  right  as  the  credit  column,  as  shown  in 
illustration  31,  page  108.  If  such  accounts  are  numerous,  as  in  the  retail  fruit  and 
dairy  business,  it  is  convenient  to  use  a  loose  leaf  book  with  journal  ruling, 
provision  having  been  made  for  giving  a  duplicate  to  the  customer  at  the  end  of 
the  month. 


108 


FARM  ACCOUNTS 


/J 


2-2- 


/  O 


30? 


3 


#*J 


Co 
to 

J-J- 

c 


£ 


Illustration  31 

It  is  wholly  unnecessary  to  keep  accounts  with  creditors.  A  bill  should  be 
required  with  each  purchase  and  kept  as  memorandum  until  paid.  Many  mer- 
chants furnish  each  customer  a  pass  book,  which  is  a  duplicate  of  their  own 
account. 

Where  the  entry  in  the  cash  book  is  not  made  at  the  time  of  the 
transaction,  it  is  important  to  remember  that  it  must  be  entered  at  the 
time  the  payment  is  made,  crediting  the  proper  enterprise  in  the  usual 
manner. 

Below  are  four  simple  exercises  which  illustrate  accounts  with  persons. 

WRITTEN  EXERCISES 

On  two  pages  of  journal  paper  write  up  the  following  accounts  and  show  the 
balance  due,  following  illustration  31. 


FARM  ACCOUNTS  WITH  PERSONS  109 

STANLEY  MURRAY 

August  1,  3  bu.  apples  @  40^;  August  4,  10  Ib.  honey  @  15^;  August  5, 
1  qt.  cream,  20^;  August  6,  1  chicken,  60^;  August  11,  2  bu.  onions  @  80^; 
August  13,  1  qt.  cream,  20j£;  August  17,  2  bu.  peaches®  60^,  1  chicken,  55^f; 
August  22,  2  Ib.  butter  @  30^;  August  27,  3  doz.  eggs  @  20^;  August  31, 
credited  by  cash,  $5.  Balance  due,  (?). 

HYDE  GROCERY  Co. 

August  2,  10  bu.  potatoes  @  60^ ;  August  5,  8  Ib.  butter  @  3Q£ ;  August  8 
10  chickens,  64$,  @  10f£;  By  groceries  as  per  bill  on  file,  $9.55;  August  11,30 
Ib.  honey  @  15^;  August  15,  5  bu.  onions  @  80j£;  August  19,  10  Ib.  butter  @ 
30^ ;  August  23,  5  boxes  apples  @  90  ?f ;  August  25,  10  chickens,  50#,  @  10^ ; 
August  31,  6  Ib.  butter  @  30^ ;  by  cash  $20.  Balance  due  (  ?). 

MRS.  N.  BROWN 

September  1,  Balance,  $2.95;  1  chicken,  50^f;  September  2,  1  qt.  cream, 
20ff;  September  4,  2  Ib.  honey  @  15^;  September  5,  3  doz.  eggs  @  35^;  Sep- 
tember 11,  1^  bu.  potatoes  @  60^;  3  Ib.  butter  @  30^;  September  15,  2  Ib. 
honey  @  15^ ;  September  19,  1  chicken,  65^ ;  September  24,  2  doz.  eggs  @ 
35f5;  September  30,  by  cash,  $8.45.  Balance  due  (  ?). 

GEORGE  KINNEY 

The  hired  man,  George  Kinney,  prefers  to  receive  his  pay  as  he  needs  it,  and 
the  proprietor  is  therefore  keeping  a  memorandum  account  with  him.  Follow- 
ing is  his  account  for  the  month  of  September : 

September  1,  Balance  due  on  wages  for  August,  $25;  September  3,  cash 
$10;  September  5,  paid  bill  at  Klines,  $7.30;  September  10,  Cash,  $5; 
September  26,  pony,  $25,  saddle,  $6;  September  27,  cash  $5;  September  30, 
wages  for  September,  $35 ;  October  1,  balance  due  him  ( ?). 


110  FARM  ACCOUNTS 

LESSON   41 
EXERCISES   IN  FARM   STATEMENTS 

Under  the  same  headings  as  in  the  previous  statements  classify  the  following 
memoranda  and  then  copy  them  neatly  on  journal  paper  : 

(A)    FINANCIAL  STATEMENT,  JAN.  1,  1912 

RESOURCES : 

514  A.  land  @  $60,  including  buildings  and  permanent  improvements; 
400  bu.  wheat  @  75ff;  500  bu.  oats  @  45^;  35  sk.  vetch  and  oats  @  $2.50; 
20  bu.  wheat  @  40^;  40  T.  loose  hay  @  $10;  10  bu.  potatoes  @  90^;  3 
grade  cows  @  $60;  2  registered  cows  @  $200;  3  grade  heifers  @  $50; 
2  registered  heifers  @  $100;  1  bull  $50;  1  bull  calf  @  $25;  12  work  horses 
@  $200;  2  two-year  horses  @  $150;  1  registered  mare  @  $500;  1  regis- 
tered 2-year  filly,  $500;  1  registered  7  mo.  filly,  $150;  3  brood  sows 
@  $20;  75  grade  sheep  @  $4;  40  registered  sheep  @  $10;  100  fowls 
@$1;  10  geese  @$1.50;  7  ducks  @  75ff;  5  hives  bees  @  $2.50;  gasoline 
engine,  $145;  spring  wagon,  $50;  wagon,  $50;  surrey,  $50;  buggy,  $25; 
binder,  $90;  hay  rake,  $15;  mower,  $30;  drill,  $50;  section  harrow,  $30; 
gang  plow,  $50;  disk  gang  plow,  $40;  walking  plow,  $5;  garden  cultivator, 
$5;  cream  separator,  $40;  4  sets  harness,  $120;  tools,  $50;  supplies,  wood, 
posts,  etc.,  $125;  accounts  and  bills  receivable,  $103.20;  cash  and  bank, 
$76.40. 

LIABILITIES  : 

Mortgage  favor  Farmers'  Coop.  Credit  Association,  5  years  @  5  per  cent, 
payable  on  or  before  Oct.  1,  1917,  $7000;  hired  labor  $125;  due  Farmers' 
Cooperative  Exchange  (on  gasoline  engine)  $75. 

(Z?)    FINANCIAL  STATEMENT,  JAN.  1,  1913 

RESOURCES  : 

514  A.  land  ©  $60;  improvements,  $570;  300  bu.  wheat  @  75^;  1000 
bu.  oats  @  45^;  30  sk.  vetch  and  oats  @  $2.50;  40  T.  baled  hay  @  $9; 
40  T.  loose  hay  @  $7;  25  bu.  potatoes  @  80^;  3  grade  cows  @  $50;  3 
registered  cows  @  $200;  1  grade  heifer,  $25;  1  registered  heifer,  $75; 
1  bull,  $75;  7  horses  @  $250;  4  horses  @  $100;  2  registered  mares  @  $500; 


REVIEW  QUESTIONS  111 

1  registered  1-year  mare,  $200;  5  8-month  colts  @  $75;  2  brood  sows  @  $15; 
50  grade  sheep  @$4;  50  registered  sheep  @  $10;  4  rams  @  $15;  100  fowls 
@  $1;  12  geese  @  $1.50;  12  ducks  @  75?f;  5  hives  bees  @  $2.50;  gasoline 
engine,  $130;  wagon,  $45;  spring  wagon,  $45;  surrey,  $48;  buggy,  $20; 
binder,  $81;  hay  rake,  $13;  mower,  $27;  drill,  $40;  4-section  harrow, 
$27;  1  gang-plow,  $45;  gang  disk  plow,  $36;  walking  plow,  $5;  garden 
cultivator,  $4;  disk  harrow,  $50;  manure  spreader,  $150;  land  roller,  $55; 
potato  planter,  $62;  cream  separator,  $36;  harness,  $200;  tools,  $55;  sup- 
plies, wood,  etc.,  $127;  accounts  and  bills  receivable,  $78.80;  cash  and  bank, 
$85.30. 

LIABILITIES  : 

Mortgage  favor  Farmers'  Coop.  Credit  Association,  payable  on  or  before 
October  1,  1917,  $3000;  hired  labor,  $140;  due  Huston  Hardware  Company, 
$73.40. 

(C)  Prepare  a  continuous  summary  of  (A)  and  (5).  See  illustration  29  b, 
page  97.  Submit  your  work  for  approval. 

LESSON  42 
REVIEW   QUESTIONS 

ON  FARM  SET  I 

NOTE.  —  As  paragraphs  in  the  Farm  Set  I  are  not  numbered,  question  num- 
bers do  not  refer  to  paragraphs. 

1.  Point  out  the  advantages  to  the  community  of  intensive  farming. 

2.  What  is  meant  by  a  Farmers'  Cooperative  Credit  Association  ?     (The 
school  library  should  be  provided  with  the  U.  S.  Government  Bulletins  on  this 
subject.) 

3.  Ask  your  parents'  opinion  of  the  division  of  the  labor  in  the  different 
enterprises. 

4.  Why  should  the  household  accounts  be  kept  separate  from  the  business 
accounts  ? 

5.  What  implements  do  you  think  should  be  found  on  the  Enterprise  Farm 
to  make  it  more  efficient  ? 

6.  Compare  the  prices  in  the  inventories  with  those  prevailing  in  your 
locality  and  point  out  the  differences. 

7.  Explain  the  method  of  finding  the  profit  or  loss. 


112  FARM  ACCOUNTS 

8.  What  is  meant  by  depreciation  ?     By  appreciation  ? 

9.  What  advantage  is  there  in  giving  George  a  percentage  of  the  annual 
profits  of  the  business  for  keeping  the  books  ?     How  much  will  he  get  in  addition 
to  his  monthly  salary  ? 

10.  What  is  the  object  of  the  continuous  annual  statement  ? 

11.  Explain  the  several  headings  in  the  farm  cash  book. 

12.  What  is  included  under  Real  Estate  ?      What  under  Repairs  ?    What 
under  Implements  ? 

13.  How  was  the  bank  pass  book  proved  ? 

14.  Of  what  three  parts  does  the  annual  financial  statement  consist,  and 
how  is  each  found  ? 

15.  Discuss  the  two  methods  for  keeping  farm  accounts  with  persons. 

16.  Why  is  it  unnecessary  to  keep  accounts  with  creditors  ? 

17.  What  is  the  value  of  the  farm  plot  ? 

18.  Describe  a  method  of  duplicating  it. 

19.  What  is  a  convenient  scale  to  use  ? 

20.  Write  a  paragraph  showing  the  importance  of  keeping  farm  and  personal 
accounts.     (Suggestions  will  be  found  in  the  preface.) 

21.  How  does  the  rate  of  profit  in  the  financial  statement  compare  w^ith  the 
interest  rates  in  your  locality  ? 

22.  Do  you  regard  the  compensation  of  Mr.  Enterprise  and  members  of  the 
family  as  satisfactory  ? 

23.  Besides  the  wages,  what  advantages  does  this  family  enjoy  which  they  did 
not  have  in  the  city  ? 


FARM  SET  II  113 

FARM   SET   II 

LESSON  43 

Lessons  43  to  54  illustrate  a  complete  system  of  accounts  for  a  modern  general 
farm  and  furnish  additional  drill  in  the  principles  already  studied.  It  includes 
not  only  complete  financial  records  on  the  double  entry  principle,  but  also  a 
system  of  cost  accounts  by  which  the  farmer  is  able  at  any  time  to  ascertain 
whether  the  business  as  a  whole,  or  any  branch  of  it,  is  paying  or  losing.  The 
narrative  is  based  on  the  operation  of  an  up-to-date  farm,  but  a  number  of 
transactions  have  been  introduced  for  the  purpose  of  illustration,  which  would, 
perhaps,  not  occur  yearly.  No  records  have  been  introduced  which  have  not 
been  tested  and  approved  by  a  large  number  of  successful  farmers. 

The  books  and  forms  used  are :  (1)  The  continuous  inventory,  (2)  The 
special-column  cash  book,  which  serves  both  as  cash  book  and  general 
ledger,  (3)  the  labor  reports,  (4)  the  feed  record  (or  sheets),  (5)  cost  accounts, 
(6)  cost  summaries,  and  (7)  statements. 

The  partnership  has  been  introduced  because  under  this  arrangement  it  be- 
comes more  natural  to  eliminate  the  household  when  considering  the  purely 
business  end  of  the  enterprise.  It  will  also  afford  an  opportunity  for  the  student 
to  study  the  laws  of  this  important  subject. 

The  dates  for  the  various  operations  recorded  in  the  cost  accounts  have  been 
omitted,  partly  to  save  space  and  partly  to  give  the  students  in  different  sections 
of  the  country  an  apportunity  to  do  original  work. 

It  is,  of  course,  impossible  to  give  an  exercise  in  which  the  crops  and  practices 
will  be  wholly  familiar  to  the  students  or  even  to  the  teacher.  This  is  rather  an 
advantage  than  otherwise  since  it  will  often  lead  to  inquiries  which  will  be  of 
value  to  the  student.  Regardless  of  these  differences  in  details,  the  bookkeeping 
principles  are  the  same  everywhere. 

It  is  the  experience  of  many  who  are  using  the  system  outlined  in  the  follow- 
ing exercise  that  if  systematically  carried  out,  it  will  not  take  the  average  farmer 
more  than  ten  minutes  per  day  to  keep  it  up.  But  as  in  everything  else  worth 
while,  success  can  be  attained  only  by  determined  efforts  and  study. 


114  FARM  ACCOUNTS 

THE  PARTNERSHIP  AGREEMENT 

Mr.  H.  M.  Phillips  owns  a  farm  of  308  acres  consisting  of  246  acres  of  cul- 
tivated land,  50  acres  of  timber  pasture,  If  acres  of  orchard  and  garden,  1|  acres 
of  yard,  and  9  acres  of  roads  and  waste,  as  outlined  in  the  diagram,  lesson  45. 
While  the  farm  has  been  a  successful  one,  he  has  come  to  the  conclusion  that 
better  results  can  be  obtained  by  taking  in  (student)  as  a  partner  and  investing 
additional  capital  to  improve  the  equipment.  It  is  the  plan  to  develop  a  model 
Dairy  and  Hog  farm  and  to  feed  nearly  all  the  crops,  thus  returning  the  fertility 
to  the  soil  in  the  form  of  manure. 

The  partnership  agreement  is  as  follows :  Student  buys  half  interest  in  the 
business  at  a  valuation  to  be  placed  upon  the  property  by  three  impartial  ap- 
praisers. Each  partner  is  to  receive  a  salary  of  $50  a  month  for  personal 
services,  and  at  the  end  of  the  year  the  profits  and  losses  are  to  be  shared  equally. 
Mr.  Phillips's  family  is  to  occupy  the  dwelling,  and  student  is  to  have  use  and 
care  of  a  room  in  lieu  of  rent.  It  is  agreed  that  each  is  to  pay  Mrs.  Phillips  $  15 
per  month  for  board,  and  in  consideration  of  occasional  services  the  household 
is  to  have  poultry  and  farm  produce  without  cost  to  Mrs.  Phillips.  A  strict 
accounting,  however,  is  to  be  kept  of  the  products  used  by  the  family  for  the 
purpose  of  showing  the  year's  results.  The  household  and  family  business, 
however,  are  to  be  kept  strictly  separate,  Mrs.  Phillips  keeping  the  household 
accounts  for  her  own  information,  according  to  the  plan  outlined  in  lesson  4. 

Mr.  Phillips's  specialty  is  farm  crops,  and  student's  is  dairying.  Student, 
who  is  also  a  skilled  bookkeeper,  will  have  charge  of  the  business  end  of  the  firm. 
It  is  decided  to  install  a  modern  system  of  both  financial  and  cost  accounts.  All 
moneys  received  are  to  be  deposited  in  the  local  bank,  and  all  payments  are  to 
be  made  by  check.  The  firm  name  is  to  be  Phillips  and  (Your  name),  and 
the  details  of  the  partnership  agreement  are  set  forth  in  Articles  of  Copartner- 
ship, dated  January  1,  1912. 

Henry  M.  Johnson,  who  has  been  in  the  employ  of  Mr.  Phillips  for  some 
time,  has  been  engaged  for  the  year  at  a  salary  of  $50  per  month,  without 
board,  for  which  he  will  pay  Mrs.  Phillips  $15  per  month. 

The  appraisers  have  handed  in  their  report  and  the  inventory  is  given  below. 
Student  settles  privately  for  half  of  the  net  worth  of  the  business,  and  each 
having  signed  the  Articles  of  Copartnership,  the  year's  partnership  is  begun. 


INVENTORY  115 

LESSON  44 
THE   INVENTORY 

Of  all  business  records,  it  is  safe  to  say  that  the  annual  inventory  is  the 
most  important  and  indispensable,  if  the  business  man  wishes  to  know  his  finan- 
cial standing.  It  is  even  possible,  though  far  from  desirable,  to  get  along  with- 
out any  other  records,  and  if  the  farmer  finds  no  time  for  further  bookkeeping, 
this  one  thing  he  must  do  :  Take  stock  of  his  belongings  at  the  end  of  every  year. 
The  total  profit  and  loss  may  be  ascertained  without  any  further  bookkeeping 
by  merely  taking  the  difference  between  the  inventory  at  the  beginning  and 
end  of  the  year.  Thus,  if  the  inventory  January  1  of  any  year  were  $5000 
and  on  the  same  date  the  next  year,  with  the  same  basis  of  valuation,  and  with 
due  allowance  for  depreciation,  the  total  is  $5500,  the  net  profit  for  the  year 
is  $500.  The  importance  of  proper  books  lies  in  being  able  to  discover  what 
enterprises  are  run  at  a  profit  and  which  ones,  if  any,  at  a  loss.  The  inventory 
is  often  of  great  value  in  settling  insurance  claims,  in  probating  estates,  and  in 
securing  loans  on  satisfactory  terms. 

What  should  be  included  in  the  inventory  ?  Everything  of  value  on  the  farm 
from  wagon  grease  to  the  automobile,  providing  it  is  used  in  the  interest  of  the 
business.  It  should  be  noted  that  no  household  equipment  should  be  in- 
cluded. Neither  a  washing  machine  nor  a  cook  stove,  though  indispensable, 
are  proper  charges  against  the  farm  as  a  business  enterprise.  They  would  be 
equally  necessary  if  the  farm  were  sold  and  the  proprietor  moved  to  town.  The 
case  is  different,  however,  with  equipment  kept  for  the  farm  hands  in  laborers' 
cottages  and  bunk  houses.  All  such  items  should  be  included  in  the  inventory. 
A  mistake  often  made  is  that  of  charging  the  farm  with  extravagant  buildings 
and  equipment.  The  value  of  a  comfortable  dwelling,  proportionate  to  the 
size  of  the  farm,  is  all  that  should  be  charged.  For  instance,  one  often  finds  a 
dwelling  worth  $10,000  on  a  few  acres  and  the  owner  enjoys  an  automobile 
and  other  luxuries.  Of  course,  all  of  this  cannot  be  charged  to  the  farm.  In 
addition  to  the  inventory  proper,  it  is  customary  to  include  miscellaneous  items 
of  property,  including  cash,  notes,  stocks,  etc.,  and  also  a  statement  of  the 
liabilities.  The  difference  between  the  total  resources  and  the  total  liabilities 
is  the  present  worth,  and  the  difference  between  the  worth  of  the  business  at 
the  beginning  and  at  the  end  of  the  year  is  the  net  profit,  providing  the  pro- 
prietor has  been  paid  for  his  labor.  Or,  it  may  be  regarded  as  the  family  in- 
come when  no  regular  wages  are  paid  except  for  hired  labor. 


116  FARM  ACCOUNTS 

The  question  of  how  the  inventory  should  be  taken  is  important  because  it 
has  a  direct  bearing  on  its  accuracy.  Perhaps  the  best  plan  is  to  head  sheets  of 
paper  with  the  respective  classes  of  property;  one  for  buildings,  another  for 
live  stock,  a  third  for  implements,  and  so  on.  Having  determined  the  headings, 
pass  through  ah1  the  buildings  and  yards,  listing,  pricing,  and  checking. 

Having  completed  the  rough  draft  and  rechecked  every  item  for  accuracy, 
the  slips  are  next  arranged  conveniently  for  copying  in  permanent  form.  Per- 
haps the  most  satisfactory  form  is  the  continuous  arrangement  shown  in  illus- 
tration 32,  page  117.  It  saves  time  and  insures  accuracy,  and  it  is  also  very 
convenient  for  reference.  Stationers  usually  can  supply  a  6,  12,  or  2-1  column 
book,  which  may  be  used  for  the  inventories,  for  the  cash  book,  and  for  any 
other  record  requiring  distribution. 

Whenever  practicable,  every  business  should  be  organized  into  departments 
for  the  purpose  of  placing  responsibility  and  securing  highest  efficiency.  The 
inventory  should  be  taken  by  the  head  of  each  department  and  checked  by 
another.  In  the  exercises  which  follow  Mr.  Phillips  has  charge  of  the  imple- 
ments, student  of  the  stock  equipment,  and  Mr.  Johnson  of  the  feed  and  sup- 
plies. 

The  most  convenient  date  for  taking  the  inventory  varies  in  different  locali- 
ties. January  1st  seems  to  be  the  natural  date  for  final  reckoning  of  the 
year's  work,  but  any  other  date  may  be  set  as  the  beginning  of  the  fiscal 
year.  Except  for  the  pressure  of  spring  work,  April  1st  would  be  convenient 
in  most  localities,  because  supplies  and  feed  are  then  low,  and  less  time  will  be 
consumed  in  weighing  and  measuring.  January  1st  has  been  adopted  in  the 
exercises  which  follow. 

WRITTEN  EXERCISE 

The  student  will  now  prepare  the  inventory  in  the  continuous  form,  see  illus- 
tration 32,  page  117,  from  the  report  handed  in  by  the  appraisers  referred  to  in 
this  lesson.  Ordinary  journal  paper  will  be  used.  You  will  need  five  pages. 
The  first  will  be  just  sufficient  for  Real  Estate  and  Products,  page  2  will  be  de- 
voted to  Stock,  3  and  4  to  Implements,  and  5  to  Miscellaneous,  Liabilities,  and 
Summaries.  Do  not  forward  totals  from  one  page  to  the  next.  Each  division 
is  totaled  and  brought  into  the  summary.  Head  the  second  column  1913  in 
anticipation  of  inserting  next  year's  inventory  in  that  column,  as  shown  in  the 
illustration.  Be  sure  to  leave  the  remainder  of  page  2  for  such  new  implements 
as  will  be  purchased  during  the  year. 


INVENTORY 


117 


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118  FARM  ACCOUNTS 

INVENTORY.     CLOVER  LEAF  DAIRY,  JANUARY  i,  1912 

REAL  ESTATE  :   308  acres,  at  $  100,  including  — - 

Farm  $24875. 

Dwelling  2000. 

Laborer's  cottage  500. 

Horse  barn  1000. 

Dairy  barn  1500. 

Hog  house  200. 

5  Colony  houses  75. 

Sheep  shed  50. 

Machine  and  tool  shed  200. 

Manure  and  straw  shed  300. 

Silo  No.  1  100. 

Total  real  estate  $30800. 

PRODUCTS : 

Wheat,  63  bu.  @  $1  $  63. 

Oats,  435  bu.  @  45j£  195.75 

Barley,  273  bu.  @  50^  136.50 

Vetch,  17|  T.  @$10  175. 

Clover,  11T.  @$11  121. 

Corn  ensilage  (estimated)  73. 

Potatoes,  250  bu.  @  60^  150. 

Fruit  and  vegetables  16. 

Wood  and  posts  162. 

Total  products  $1092.25 

HORSES  :  No. 

Brood  mares  (above  5  yr.)  6     $1200. 

Driving  horses,  3  yr.  2         250. 

Colts  4         500. 

Total  horses  $1950. 

HOGS: 

Boar  1      $   35. 

Sows  10         200. 

Pigs  55         330. 

Total  hogs  .              $565. 


INVENTORY 


]  19 


CATTLE  : 

Bull 

Cows,  average  @  $60 
Heifers,  average  @  $25 
Calves,  average  @  $15 

Total  cattle 
SHEEP  : 

Graded  Sheep,  average  @  $4 
POULTRY  : 

Chickens,  average  @  75^ 
Turkeys,  average  @  $2.50 
Ducks,  average  @  85  f£ 
Geese,  average  @  $1.50 
Total  poultry 
Total  live  stock 

IMPLEMENTS  : 

Separator 
Babcock  tester 
Milk  cans 
Milk  cart 
Hose 
Disk  drill 

Land  plaster  sower 
Corn  binder 
Corn  planter 
Steel  plow 
Walking  plow 
Clod  masher 
Subsoiler 
Disk  cultivator 
Riding  plow 
Mower 
Hay  rakes 
Harrow 
Corn  sheller 
Corn  cultivator 
Forward 


No. 

1 

$150. 

24 

1440. 

8 

200. 

10 

150. 

$1940. 

80 

$320. 

200 

$150. 

5 

12.50 

5 

4.25 

3 

4.50 

$171.25 

1 

$90. 

1 

8. 

30 

30. 

1 

20. 

150  ft. 

8. 

1 

55. 

1 

10. 

1 

100. 

1 

40. 

1 

8. 

1 

8. 

1 

3. 

1 

13. 

1 

35. 

1 

30. 

1 

40. 

3 

36. 

1 

10. 

1 

8. 

1 

25. 

$4946.25 


$577. 


120  FARM  ACCOUNTS 

Brought  forward  No.    $577. 

Harness  7         175. 

Hatching  equipment  and  brooders  40. 

Poultry  appliances  20. 

Scales    •  1           15. 

Buggy  1           60. 

Wire  stretcher  1             4. 

Stump  puller  1         160. 

Wagon  1           35. 

Wagon  1           80. 

Wheel  barrows  2             4. 

Double  trees,  etc.  25. 

Grindstone  1              3. 

Farm  bell  1              3. 

Buckets,  tubs,  etc.  10. 

Tools  25. 

Total  implements  $1236. 

MISCELLANEOUS  : 

Supplies:  nails,  twine,  oil,  etc.  $25. 
Cash  and  cash  items,  including  bank 

balance,  notes,  and  due  bills  250.80 
Total  miscellaneous                                                                          $275,80 

LIABILITIES  : 

Mortgage  favor  State  School  Fund  (6  per  cent)   $8000. 

Interest  due  120. 

Unpaid  labor  45. 

Total  liabilities  $8165. 

SUMMARY 

Real  estate  $30,800. 

Products  1,092.25 

Live  stock  4,946.25 

Implements  1,236. 

Miscellaneous  275.80 

Total  resources  $38,350.30 

Total  liabilities  8,165. 


Net  worth  $30,185.30 


FARM  PLOT  121 

LESSON  45 
THE  FARM  PLOT 

This  farm  is  of  very  irregular  shape,  being  bounded  on  the  southeast  by 
the  river  and  on  the  northwest  by  the  foothills.  It  is,  therefore,  very  difficult  to 
plot  to  scale.  Nor  is  this  necessary  when  the  object  is  merely  to  preserve  a 
record  of  the  crop  rotation.  It  is  desirable,  however,  to  take  some  pains  with 
the  first  outline,  since  subsequent  plots  can  be  reproduced  by  tracing  the  first  over 
carbon  paper.  Several  copies  can  be  obtained  in  this  manner  at  the  same  time. 

WRITTEN  EXERCISE 

Draw  a  rectangle,  embracing  the  plot,  illustration  33,  page  122,  in  your  text- 
book. Divide  the  sides-  of  the  rectangle  into  four  equal  parts,  and  join  the 
opposite  points  by  faint  pencil  lines.  On  a  sheet  of  paper  draw  a  rectangle 
with  double  the  length  of  sides  of  the  figure.  Divide  the  sides  into  four  equal 
parts  and  join  the  points.  You  are  now  able  to  reproduce  the  figure  in  the  book 
very  closely  by  noting  the  points  where  the  field  boundaries  intersect  with  the 
field  lines.  It  will  give  you  a  plot  four  times  the  size  of  the  illustration.  First 
mark  the  points  and  then  join  them  with  light  pencil  lines.  When  you  find  the 
figure  satisfactory  trace  it  in  ink.  Practice  lettering  on  a  separate  sheet  until 
your  work  is  something  like  the  illustration. 

Note  that  the  principal  fields  are  numbered,  and  when  the  field  is  devoted  to 
more  than  one  crop,  the  patches  are  numbered  3a,  36,  etc. 

As  suggested  on  page  96,  a  convenient  scale  to  use  in  plotting  land  is  an  inch 
to  a  certain  number  of  chains,  rods,  or  feet.  It  is  not  necessary  to  give  rules  in 
mensuration  here.  They  are  found  in  any  good  arithmetic.  Here  is  a  table, 
however,  which  will  be  useful  in  plotting  your  farm.  One  acre  is  equal  to  10 
rods  by  16  rods,  or  8  by  20,  or  5  by  32,  or  4  by  40 ;  in  fact,  the  length  of  two 
adjacent  sides  of  the  rectangle  may  be  any  two  factors  of  160  rods.  It  is  often 
interesting  to  designate  each  crop  by  different  colors.  The  diagram  should  be 
sufficiently  large  to  give  space  on  each  plot  for  crop  rotation,  yield,  and  other 
data  of  interest. 


122 


FARM  ACCOUNTS 


14.   l  Orchard.    2  Dwelling  and  Yard.     3  Barns,  etc. 
Illustration  33 

OPTIONAL  EXERCISE 

Prepare  a  diagram  of  your  home  farm,  using  the  exact  survey  as  shown  on 
the  abstract  of  title.  You  will  find  it  exceptionally  interesting  to  study  the 
abstract  and  the  several  legal  questions  connected  with  it. 


CASH  BOOK  — LEDGER  123 

LESSON  46 
THE  CASH  BOOK  — LEDGER 

Farming  may  be  regarded  as  a  cash  business  so  far  as  bookkeeping  is  con- 
cerned. Since  the  year  is  the  unit  of  bookkeeping,  in  the  large  majority  of 
cases  it  is  possible  to  "wind  up"  all  petty  accounts  before  the  end  of  the  fiscal 
year,  and  thus  have  all  the  business  brought  into  the  cash  book. 

Wherever  possible,  purchases  should  be  made  for  cash  or  exchanged  for  farm 
products,  which  amounts  to  the  same  thing.  If  accounts  are  carried,  the  bills 
are  settled  monthly,  or  at  other  regular  intervals.  It  is  preferable  to  pay  for 
definite  items  rather  than  so  much  on  account.  For  instance,  suppose  a  bill 
for  items  A,  B,  C,  D,  and  E  is  due  amounting  to  $25.40,  and  only  $15  can  be 
paid.  It  is  found  that  A,  B,  and  C  amount  to  $13.20.  It  is  preferable,  so  far  as 
the  farmer  is  concerned,  to  pay  only  for  the  three  items  rather  than  to  pay  $15 
on  account,  since  the  several  items  may  be  chargeable  to  different  accounts,  and 
splitting  an  item  often  causes  trouble  in  the  bookkeeping.  It  is  generally 
unnecessary  to  keep  accounts  with  the  dealers.  The  bills  and  some  suitable  mem- 
oranda are  quite  sufficient.  All  outstanding  accounts  should  be  paid  at  the 
end  of  the  fiscal  year  so  as  to  insure  the  proper  charges.  If  this  is  not  done,  the 
outstanding  bills  may  be  classified  in  the  same  manner  as  the  cash  payments  and 
charged  to  the  several  accounts.  The  total  of  the  outstanding  bills  would  be 
classed  as  Accounts  Payable. 

It  is  customary  for  wholesale  houses  to  sell  goods  on  time  subject  to  certain 
terms.  Thus,  they  often  give  5  per  cent  off  if  the  bill  is  paid  within  ten  days,  or 
perhaps  2  per  cent,  if  paid  in  thirty  days,  and  net  if  not  paid  within  thirty  days, 
up  to  sixty  days.  This  is  written,  Terms :  5/10,  2/30,  n/60.  Business  men  gen- 
erally have  come  to  realize  the  importance  of  discounting  bills,  even  if  it  requires 
occasional  small  loans  at  the  bank.  Merchants  are  usually  willing  to  give  a 
discount  for  cash  far  in  excess  of  the  interest  charged  at  the  bank  for  the  same 
amount.  For  example,  suppose  it  is  desired  to  buy  a  piece  of  machinery  in  June 
which  costs  $50.  The  merchant  will  doubtless  be  willing  to  give  at  least 
5  per  cent  off  for  cash,  which  amounts  to  $2.50.  The  interest  for  ninety  days  on 
$50  at  6  per  cent  is  only  75^,  a  saving  on  this  item  alone  of  $1.75  besides  the 
improved  credit.  It  is  the  dollar  saved  as  well  as  the  dollar  earned  that  swells 
the  annual  profit  and  brings  success  instead  of  failure.  Paid  bills  are  filed  away 
for  reference,  as  suggested  on  page  126.  The  number  of  the  check  should  be 
noted  on  the  bill  and  also  the  distribution.  See  illustration  19,  page  79. 


124 


FARM  ACCOUNTS 


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Illustration  34 

All  receipts  are  deposited  and  all  payments  are  made  by  check.  Thus,  when 
all  the  checks  are  paid  by  the  bank,  the  bank  book  agrees  with  the  cash  book. 
Petty  items  are  paid  by  the  partners  out  of  private  money  and  they  are  reim- 
bursed by  check  at  convenient  intervals. 

It  is  very  important  that  the  cash  be  balanced  at  least  once  a  month.  This 
should  be  done  when  the  bank  returns  the  canceled  checks.  The  form  of 
noting  the  balance  is  shown  in  illustration  34.  The  bank  pass  book  is  proved 
by  the  cash  book  balance  as  follows :  To  the  cash  book  balance  add  the  out- 
standing checks ;  the  sum  is  equal  to  the  bank  book  balance. 

If  no  regular  vouchers  are  kept,  all  the  items  should  be  entered.  If  vouchers 
are  kept  when  payments  are  made,  only  the  name  of  the  payee  need  be  entered, 
or  when  cash  sales  are  made,  the  number  of  the  duplicate  sales  slip  only  need 
be  entered.  This  method  is  shown  in  illustration  34. 

If  sales  are  made  on  time,  it  is  understood  that  payment  will  be  made  before 
the  end  of  the  year,  and  a  memorandum  account  should  be  kept,  entering  the 
payment  when  it  is  made. 

The  headings  of  the  distribution  columns  in  the  cash  book  are  for  the  most; 


CASH  BOOK  — LEDGER 


125 


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Illustration  34 

part  self-explanatory.  In  practice  they  may  be  varied  to  suit  the  conditions  of 
any  farm.  In  the  exercise,  every  cash  sale,  or  other  money  received  from  the  farm 
crops,  is  entered  in  the  Farm  Crops  column.  In  the  Farm  Crops  are  included 
grain,  hay,  and  potatoes,  while  under  Orchard  and  Garden  are  entered  fruits, 
vegetables,  including  onions.  Since  dairying  is  inseparably  connected  with  the 
cattle,  these  two  titles  are  united,  and  in  this  column  are  entered  all  sales  of  cattle 
and  dairy  products,  including  milk,  cream,  cheese,  etc.  Horses,  Sheep  and  Hogs, 
and  Poultry  require  no  explanation.  In  the  Sundries  column  are  entered  all 
items  which  cannot  properly  be  placed  in  the  other  columns.  On  the  payments 
side  crops  are  debited  in  the  Crops  column  with  all  purchases  intended  directly 
for  the  use  of  crops,  including  seed,  fertilizers,  boxes  and  packing,  twine,  threshing, 
etc.  Under  Live  Stock  are  entered  all  direct  charges  against  animals  on  the  farm, 
including  poultry.  Fees  in  the  Cow  Testing  Association,  horseshoeing,  veterinary 
services  and  the  like  are  proper  charges  to  Live  Stock.  All  labor  is  entered  in 
the  Labor  column  even  though  it  is  known  to  be  applied  directly  to  any  partic- 
ular enterprise,  since  in  the  cost  accounts  labor  is  distributed  at  the  uniform  rate 
of  20  cents  per  hour.  If  practicable,  labor  may  be  apportioned  at  the  time  of 
paying  the  wages  into  the  various  enterprises.  Under  Implements  is  entered 


126 


FARM  ACCOUNTS 


all  purchases  of  new  machinery,  tools,  etc.,  but  not  when  the  article  is  intended 
to  replace  one  that  has  been  previously  inventoried.  Under  Improvements  are 
entered  all  outlays  which  add  permanent  value  to  the  property,  such  as  buildings, 
new  fences,  etc.  Under  Repairs  are  entered  all  payments  which  are  made  for 
the  maintenance  or  upkeep  of  the  property,  such  as  nails,  lumber,  and  other 
material  bought  for  use  in  repairing.  In  the  General  Expense  column  are 
entered  all  outlays  which  cannot  properly  be  charged  against  definite  enterprises, 
but  which  are  a  loss  to  the  business.  In  the  Sundries  column  are  entered  all 
items  wrhich  do  not  fall  under  the  other  columns. 

It  is  generally  preferable  to  forward  the  totals  from  page  to  page  until  the 
end  of  the  year  rather  than  to  close  each  month  and  carry  forward  the  balance 
only. 

Because  of  the  limited  space  and  because  some  classes  of  transactions  have 
very  few  entries,  certain  columns  frequently  contain  more  than  one  class  of 
entries.  For  instance,  in  the  receipts,  all  the  farm  crops  are  grouped  together ; 
also  orchard  and  garden,  and  so  on.  If  it  is  desired  to  classify  them  separately, 
it  is  only  necessary  to  run  through  the  columns  and  pick  out  the  items  under  each 
heading.  The  total  of  the  several  headings,  of  course,  equals  the  total  of  the 
column  in  which  they  are  grouped. 

One  of  the  most  satisfactory  methods  of  filing  vouchers  is  in  envelopes 
properly  numbered  to  correspond  with  the  numbers  of  the  checks,  as  follows : 


£ 


Illustration  35 


A  No.  10  Manila  envelope  is  recommended.  For  convenience  of  ref- 
erence each  envelope  contains  10  vouchers,  beginning  1,  11,  21,  31,  etc.  The 
bills  are  filed  as  they  are  paid  with  the  check  number  marked  on  each  voucher, 


CASH  BOOK  — LEDGER  127 

and  when  the  canceled  checks  are  returned,  they  are  attached  to  and  filed  with 
the  corresponding  bills.  Index  cards  may  be  made  as  desired  and  kept  either 
in  the  front  or  back  of  the  envelopes. 

It  is  now  quite  customary  to  note  on  the  check  briefly  the  items  paid,  or  at 
least  the  date  or  number  of  the  bill.  This  is  usually  done  in  the  lower  left-hand 
corner  or  immediately  under  the  amount  in  wrriting.  A  check  on  which  is 
provided  a  regular  space  for  this  purpose,  and  sometimes  also  for  the  distribu- 
tion of  the  payments  is  called  a  voucher  check.  Such  a  check  is  usually  regarded 
as  a  sufficient  receipt.  Any  large  business  should  provide  itself  with  these 
checks. 

No  household  expenses  whatever  are  included  in  the  cash  payments.  All 
private  payments  are  made  out  of  the  monthly  wages,  and,  if  desired,  each 
partner  can  keep  his  private  accounts  on  a  form  similar  to  the  one  illustrated 
on  pages  14  and  15.  If  it  becomes  necessary  to  advance  more  than  the  monthly 
wages  to  either  partner,  a  separate  check  is  written  and  the  amount  is  extended 
in  the  Sundries,  and  not  in  the  Labor,  column. 

WRITTEN  EXERCISE 

Below  are  the  cash  receipts  and  payments  for  the  year.  The  student  will 
enter  them  on  the  blank  corresponding  to  illustration  34,  pages  124  and  125. 
Note  that  the  first  few  entries  correspond  with  the  illustration.  The  use  of 
the  columns  is  fully  explained  above.  The  work  is  to  be  balanced  and  proved 
each  month. 

JANUARY,  1912 
RECEIPTS  : 

1.  Balance  on  hand,  $250.80  (Do  not  fail  to  enter  in  both  the  total  and  the 

sundries  columns.) 
5.  Farmers'  Cooperative  Association 

100  #  chickens  @  15£ 
15.  Benton  Produce  Co. 

81,500  #  potatoes  @  1  £. 
15.  E.  R.  Lawrence  paid  interest  $  4 
15.  Cooperative  Creamery 

510  #  butter  fat  @  35  i 
27.  Farmers'  Cooperative  Association 
185  doz.  eggs  @  45  i 


128  FARM  ACCOUNTS 

PAYMENTS  : 

2.  Check  1.     Independent  Telephone  Co. 

Service  for  January,  February,  and  March,  $  3.50. 
2.  2.     F.  M.  Johnson 

Wages  due  for  December  45. 

5.  3.     R.  M.  Wade  &  Co.,  Hardware 

Fence  wire  25.30 

Lumber  42. 

Nails  2.40 

Bolts  .75 

Manure  spreader  150. 

(All  the  supplies  are  for  repairs.     Hence 
Implements,  $  150 ;  Repairs,  $  70.45.) 
8.  4.    H.M.Phillips 

Attendance  Farmers'  Week  at  State  College  $  25. 
(This  trip  was  taken  in  the  interest  of  the 
business  to  learn  new  methods.     Hence 
it  is  charged  to  General  Expense.) 
Incidental  expense  items  as  follows : 
Cash  book  2. 

Time  books  .50 

Journal  for  cost  accts.  1. 

Manila  envelopes  for  voucher  file  .50 

Blank  paper  for  special  records  .25 

Miscellaneous  .75 

Stationery  5.  30. 

(These  items  were  paid  for  by  Mr.  Phil- 
lips personally  and  he  is  now  reim- 
bursed out  of  the  partnership  funds. 
This  practice  enables  the  firm  to  pay 
all  bills  by  check.  His  personal  mem- 
orandum is  filed  with  check  number  4, 
the  same  as  any  other  bill.  In  large 
establishments  it  is  customary  to  ad- 
vance a  certain  amount  for  petty  cash 
items,  but  here  this  is  unnecessary.) 


CASH  BOOK  — LEDGER  129 

15.  5.    E.  K.  Abraham 

Improvements  to  dairy  barn,  as  per  con- 
tract and  specifications  221. 
24.              6.    J.  R.  Smith  &  Co. 

Gasoline  engine  145. 

24.  7.     Cow-Testing  Association 

Quarterly  dues  (live  stock.)  3. 

31.  8-10.  Salaries,  Phillips,  Student,  Johnson,  each 
$  50.  (Salaries  will  be  paid  regularly 
every  month.)  150. 

FEBRUARY 

RECEIPTS : 

10.  Farmers'  Cooperative  Association 
100  #  geese  @  20  i 

20.  Deering  Construction  Co. 

35  days'  team  hire  @  $  2 

21.  Cooperative  Creamery 

540  #  butter  fat  ©  35  i 
21.  Farmers'  Cooperative  Association 
235  doz.  eggs  @  40  i 

PAYMENTS  : 

1.  Check  11.     Dunn  Bros.  Lumber  Co. 

Material  for  repairs  to  dwelling  $42.30 

4.  12.     Corvallis  Lumber  Co. 

4  M  shingles  @  $2.50 

(For  repair  of  dwelling  roof.) 
10.  13.     R.  H.  Huston 

Fork  handle  $   .30 

Nails  2.40 

3  Pitchforks  @  60  i  1.80 

Part  for  mower  1.30 

Wagon  pole  6. 

(Repairs  and  replacements.) 

25.  14.     Springer  &  Hunter,  Plumbers, 

Installation  of  water  system  260. 


130  FARM  ACCOUNTS 

28.         15-17.     Salaries 

28.  18.     Henkle  Saddlery  Co. 

1  set  harness  30. 

You  will  now  total  all  the  columns.  Add  the  totals  of  the  distribution 
columns  on  the  receipt  side  and  see  that  the  sum  equals  the  total  receipts. 
Do  the  same  with  the  payments. 

Then  find  the  cash  balance.  Write  the  balance  on  the  next  line  below  the 
last  entry  on  the  receipt  side,  writing  the  balance  in  the  items  column,  as 
shown  on  page  124. 

MARCH 

RECEIPTS  : 

2.  Farmers'  Cooperative  Association 

50  #  chickens  @  15  i 
11.  J.  R.  Brown 

2  sheep  @  $  5 

25.  Farmers'  Cooperative  Association 

285  doz.  eggs  at  25  jf 

26.  Farmer's  Cooperative  Creamery 

600  #  butter  fat  @  30  i  * 

28.  John  Henderson 

1  colt,  20  months,  $115 

PAYMENTS  : 

1.  Check  19.     Century  Newspaper  Agency 

World's  Work,  Country  Gentleman, 

Breeder's  Gazette  5. 

4.  20.     Edward  Hunter 

Repairing  well  10. 

30.  21.     H.  M.  Phillips 

Attendance  at  State  Breeder's  Associa- 
tion 5.30 
Postage  1. 
Salary                                                                             50. 
(General      Expense,      $6.30,      Salary, 
$50.) 


CASH  BOOK  — LEDGER  131 

22-23.     Salaries,  Student  and  Johnson 
24.     Portland  Seed  Co. 

Rye  seed  12.25 

Vetch  seed  63. 

Clover  seed  31.20 

Rape  seed  2.55 

Kale  seed  3. 

Seed  peas  28.60 

Seeds,  plants,  etc.  4.40 

Seed  corn  2.70 
(Crops.) 

APRIL 
RECEIPTS  : 

1.  Henry  Sullivan 

80  lambs  ©  $  3 
15.  Robert  C.  Richards 

2  colts   @  $  130,  two  years  old. 
20.  Stromberg  Bros. 

8  heifers  @  $  25 
30.  Cooperative  Creamery 

610  #  butter  fat  @  25  i 
Farmers'  Cooperative  Association 
260  doz.  eggs  ©  20  i 

PAYMENTS  : 

1.  Check  25.     County  Treasurer 

Taxes,  1912  205. 

(General  Expense.) 
1.  26.     State  Treasurer 

Int.  on  $  8000  for  6  mo.  @  6  per  cent 

(General  Expense.) 
1.  27.     Independent  Telephone  Co. 

Service  for  April,  May,  and  June      .  3.50 

5.  28.     Tinker  Bros. 

Horseshoeing  5. 

(Charge  to  Live  Stock  since  it  is  charged 
to  horses  in  the  cost  accounts.) 


132  FARM  ACCOUNTS 

16.  29.    Hout  &  Whiteside 

Halter  1.50 

Pails  .80 

Milk  cans  2. 

(To  replace  broken  ones.) 

30.        30-32.     Salaries 

33.  Hector  M.  Hollis 

Breaking  colts  90. 

(Live  Stock) 

34.  Dr.  Horace  Morell,  Veterinarian, 

Treatment  of  horses  15. 

(Live  Stock) 

35.  R.  M.  Wade  &  Co. 

Potato  Planter  62. 

36.  Cow  Testing  Association 

Quarterly  dues  3. 

Find  the  cash  balance.     All  cash  has  been  deposited.     The  bank  has  returned 
the  pass  book  and  the  canceled  checks.     All  are  returned  except  numbers  7,  17, 
and  20.     It  shows  a  balance  of  $651.95.     Prove  the  correctness,  as  follows: 
Our  balance 
Check    7 
17 
20 
Bank  Balance 

Is  the  balance  correct  ?  Place  a  check  mark  at  the  left  of  all  the  numbers 
except  7,  17,  and  20.  In  practice  the  bank  balance  should  be  proved  every 
month.  The  canceled  checks  are  now  filed  either  in  numerical  order  or  with 
the  vouchers  in  their  respective  envelopes. 

MAY 

EECEIPTS  : 

3.  Edward  C.  Green 
4  calves  @  $  10 
10.  Edward  Homer 

Garden  truck  $  12 
20.  John  Winkle 

10  M  #  hogs  @  7  i 


CASH   BOOK  — LEDGER 


133 


26.  Cooperative  Creamery 

590  #  butter  fat  @  25  £ 

30.  Farmers'  Cooperative  Association 

235  doz.  eggs  @  20  i 

PAYMENTS  : 

4.  Check  37.     E.  K.  Russell 

Labor,  repairing,  tiling 
16.  38.    E.  H.  Friedolf 

Wages  for  General  Assistance  in  Spring 

work 
16.  39.     Geo.  Rudolf 

Wages  for  general  assistance 

25.  40.     J.  B.  Pilkington 

Land  plaster 
Spraying  material 
Rose  cuttings 

31.  41-43.     Salaries 

(Add  $  1  to  Phillips's  check  for  stamps.) 
31.  44.     R.  H.  Huston 

Lawn  mower 
Surrey 

JUNE 
RECEIPTS  : 

8.  Kline  Bros. 

640  #  Wool  @  20  i 

20.  Johnson  &  Hunter 

Garden  truck  $  20 

21.  Hotel  Julian 

500  #  strawberries  @  5  i 

26.  Cooperative  Creamery 

500  #  butter  fat  at  25  i 
29.  Farmers'  Cooperative  Association 
210  doz.  eggs  @  25  i 

PAYMENTS  : 

1.  Check  45.     Benton   County   Growers'   Association 
Bonds 


10.20 

20. 
16.40 

11. 
5.40 
.75 


12. 
150. 


20. 


134  FARM  ACCOUNTS 

5.  46.     Edward  Holgate 

Shearing  80  sheep  @  10  i  8. 

24.  47.    J.  R.  Smith  &  Co. 

Sheep  shears  7. 

Spraying  outfit  10. 

24.  48.     R.  H.  Huston 

1  Hay  loader  90. 

1  Hay  rake  75. 

1  Harpoon  hay  fork  2. 

1  Hay  sling  4.50 

1  Unloader  15. 

30.  49-51.     Salaries 

The  bank  has  returned  the  pass  book.     Checks  41,  45,  and  46  are  out- 
standing.    What  should  be  the  bank  balance  ? 

LESSON  47 
CASH  BOOK— LEDGER,  Continued 

Prepare  a  cash  statement  for  the  first  six  months  (see  form,  page  102)  and 
submit  it  to  your  teacher  for  approval.     Then  complete  the  entries  for  the  year. 

JULY 

RECEIPTS  : 

3.  City  Livery 

1  load  clover  hay  $  7.90 
20.  Edward  Horning 

Garden  truck  $  1 1 
22.  Hotel  Julian 

Milk  and  cream  $  3 
26.  Cooperative  Creamery 

450  #  butter  fat  at  25  £ 

31.  Farmers'  Cooperative  Association 

195  doz.  eggs  @  25  £ 
31.  City  Stable 

1  load  vetch  $  9.80 


CASH  BOOK  — LEDGER  135 

PAYMENTS  I 

1.  Check  52.     Independent  Telephone  Co. 

Service  for  July,  August,  September  3.50 

15.  53.     Fred  Buchanan 

Baling  15  T  vetch  ©  $  2 
Baling  10  T.  clover  @  $  2 

15.  54.     Cow-Testing  Association 

Quarterly  dues  3. 

16.  55.  Farmers'  Cooperative  Association  (Crops.) 

Twine  33.55 

Paper  2.20 

26.  56.     R.  M.  Wade  &  Co. 

McCormick  binder  150. 

31.        57-59.    Salaries 

AUGUST 
RECEIPTS  : 

5.  Johnson  &  Hunter 

Garden  truck  $  11.20 
19.  Farmers'  Cooperative  Association 
100  #  ducks  @  20  i 

19.  Benton  Produce  Co. 

63  T.  vetch  hay  @  $  10 

20.  Johnson  &  Hunter 

400  #  blackberries  @  5  i 

27.  Cooperative  Creamery 

500  #  butter  fat  @  30  i 
30.  Farmers'  Cooperative  Association 

160  doz.  eggs  @  30  i 
30.  City  Stable 

32  T.  clover    @  $11 

PAYMENTS  : 

5.  Check  60.     Philip  Bates,  Threshing 

300  bu.  wheat  @  6  i 
3120  bu.  oats  @  4  i 
1155  bu.  barley  @  5  £ 


136  FARM  ACCOUNTS 

16.  61.     Farmers'  Cooperative  Association 

82  sacks  @  10  i 

800  sacks  @  5  i  (seconds) 
31.  62.     H.  M.  Phillips 

Expenses  at  State  Fair  15.40 

Salary  50. 

31.         63-64.     Salaries,  Student  and  Johnson 
31.  65.     E.  H.  Friedolf 

General  labor  23.40 

SEPTEMBER 

RECEIPTS  : 

2.  City  School  Board 

50  Cord  wood   @  $4 
10.  Farmers'  Cooperative  Association 

100  #  ducks  @  20  £ 
18.  E.  K.  Sharp 

2  sacks  barley,  $1.60 
20.  Hotel  Julian 

Milk  and  cream,  $  2 
27.  Cooperative  Creamery 

640  #  butter  fat  @  30  i 
27.  Farmers'  Cooperative  Association 

85  doz.  eggs  @  35  £ 

PAYMENTS  : 

5.  Check  66.     Tinker  Bros. 

Horseshoeing  5. 

25.  67.     Benton  Lumber  Co. 

Boxes  and  crates  (Crops)  28.70 

27.  68.     Edward  G.  Dryer 

Engine,  rented  for  cutting  silage  11.20 

Gasoline,  for  same  3.50 

30.  69.     R.  H.  Huston 

Seed  cleaner  35. 

Potato  digger  126. 

30.         70-72.     Salaries 


CASH  BOOK  — LEDGER  137 

OCTOBER 
RECEIPTS 

5.  Winkle  Elevator  Co. 

2120  bu.  oats  @  45  i 
10.  John  Winkle 

150  M#  hogs  @  7  i 
16.  Fisher  Mills 

164  bu.  wheat  @  $  1 

20.  Winkle  Elevator  Co. 

134  bu.  barley  @  50  i 

21.  Farmers'  Cooperative  Association 

100  boxes  apples  @  $  1 
44  boxes  pears  @  $  1.20 

25.  Geo.  Schneider 

4  calves  @  $  15 

29.  Cooperative  Creamery 

650  #  butter  fat  @  30  jf 

30.  Farmers'  Cooperative  Association 

45  doz.  eggs  @  40  £ 

PAYMENTS  : 

2.  Check  73.     Cow-Testing  Association 

Quarterly  dues  3. 

2.  74.     State  Treasurer 

Int.  on  $  8000  for  6  mo.  @  .6  per  cent 
2.  75.     Independent  Telephone  Co. 

Services  for  October,  November,  and  December  3.50 

31.  76-78.     Salaries 

NOVEMBER 
RECEIPTS  : 

12.  Farmers'  Cooperative  Association 
63  sacks  onions  @  $  1.25 
160  #  turkeys  @  20  i 

26.  Cooperative  Creamery 

550  #  butter  fat  @  35  j£ 
29.  Farmers'  Cooperative  Association 
60  doz.  eggs  @  45  i 


138  FARM  ACCOUNTS 

PAYMENTS  I 

3.  Check  79.     R.  M.  Wade  &  Co. 

Complete  tool  kit  $25. 

6.  80.     J.  K.  Gill  Co. 

Account  book  .50 

Billheads  1. 

Receipt  book  .25 

Letterheads  -3. 

Envelopes  1.50 

30.         81-83.     Salaries 


DECEMBER 

RECEIPTS  : 

2.  Deering  Construction  Co. 

25  days'  team  labor  @  $  2 
7.  W.  S.  Brown 

108  posts  @  25  i 
19.  Farmers'  Cooperative  Association 

200  #  turkeys  @  20  i 
27.  Cooperative  Creamery 

500  #  butter  fat  @  35  i 
30.  Hotel  Julian 

Milk  and  cream,  $  3.60 
30.  Farmers'  Cooperative  Association 

110  doz.  eggs  @  50  i 

PAYMENTS  : 

3.  Check  84.     State  Treasurer 

Payment  of  $4000  on  mortgage  and  2 
mo.  interest  on  $8000,  $80.    New 
mortgage  payable  on  or  before  De- 
cember 1,  1917 
5.  85.     Tinker  Bros. 

Horseshoeing  5. 

16.  86.     Dr.  Morell 

Veterinary  fees,  tuberculosis  test  7. 


CASH  BOOK  — LEDGER  139 

31.        87-89.     Salaries 

31.  90.    J.  R.  Smith  Co. 

Litter  carrier  installed  50. 

Oil  -50 

Gasolkae 
31.  91.     E.  K.  Abraham 

For  building  silo  No.  2  150. 


140  FARM  ACCOUNTS 

LESSON  48 
VALUATION  AND   DEPRECIATION 

In  connection  with  the  annual  inventory,  two  very  important  questions  arise, 
namely  :  What  value  shall  be  placed  on  the  property  ?  and,  What  allowance  shall 
be  made  for  the  natural  "wear  and  tear"  ? 

The  actual  value  of  any  business  depends  ultimately  on  its  earning  capacity. 
If  land  can  be  relied  upon  to  earn  $  6  an  acre  a  year  besides  compensation  for 
labor,  depreciation,  and  risk,  and  6  per  cent  is  the  current  rate  of  interest,  it  is 
worth  $100  an  acre.  However,  this  is  not  ordinarily  a  practicable  way  of 
arriving  at  land  values,  because  few  farmers  know  what  profit  their  land  returns 
per  acre.  When  the  farmers  keep  accurate  records,  this  will  probably  be  the 
most  satisfactory  basis  for  land  valuation. 

Sentiment  is  sometimes  allowed  to  influence  the  valuation,  since  the  home- 
stead is  worth  more  to  the  original  settler  than  to  any  subsequent  owner.  This 
should  not  be  encouraged.  The  taxable  value,  or  any  proportion  based  on  it,' 
is  likely  to  prove  unreliable  because  of  the  variety  of  tax  rates  even  in  adjoining 
counties.  Perhaps  the  best  valuation  is  a  rather  conservative  estimate  at 
what  the  land  would  bring  if  it  were  to  be  sold  in  the  open  market.  This  can 
usually  be  ascertained  with  fair  accuracy,  since  there  are  in  every  community 
frequent  sales  of  land  situated  similarly  to  the  farm  in  question.  Under  any 
circumstances,  it  is  preferable  to  undervalue  rather  than  to  overvalue. 

Stock  and  farm  produce  should  be  valued  at  current  market  prices,  while 
implements  and  tools  should  be  valued  at  cost  less  due  allowance  for  depreciation. 

Depreciation  may  be  defined  as  the  decrease  in  value  which  property  under- 
goes (1)  through  use,  (2)  becoming  out  of  date,  (3)  being  placed  in  a  less  favorable 
position  than  formerly,  and  (4)  through  abuse.  Often  a  business  becomes  embar- 
rassed because  large  profits  have  been  declared  while  the  plant  has  gone  to  ruin. 
Through  neglect  the  equipment  has  become  impaired  and  no  fund  has  been  set 
apart  with  which  to  replace  it.  To  guard  against  this,  the  Interstate  Commerce 
Commission  now  requires  that  all  concerns  under  its  jurisdiction  shall  set  aside 
a  certain  percentage  of  their  earnings  for  replacement  of  equipment.  The  farmer 
is,  of  course,  less  responsible  to  the  public  for  failure  to  exercise  prudence  in  this 
respect,  but  he  is  generally  most  successful  who  follows  sound  business  practice 
in  this  matter. 

Even  with  the  best  of  care  a  mower  will  last  only  ten  or  fifteen  years.  If  it 
lasts  ten  years,  and  costs  $50  new,  $5  is  the  annual  loss  due  to  depreciation. 


VALUATION  AND   DEPRECIATION  141 

If  a  house  lasts  50  years,  2  per  cent  is  lost  each  year.     In  each  case  the  loss  is 
as  much  an  expense  against  the  year's  business  as  wages,  insurance,  or  interest. 

But  depreciation  is  often  the  result  of  new  inventions  more  than  of  actual 
wear.  For  instance,  the  man  who  had  just  purchased  an  old-style  reaper 
about  the  time  the  self-binder  appeared,  lost  nearly  100  per  cent  in  one  year 
because  he  could  not  afford  to  use  the  old  implement  in  competition  with  the  new. 
Fortunately,  the  farmer  is  less  affected  by  depreciation  due  to  property  being 
out  of  style,  though  he  is  by  no  means  free  from  it.  This  is  most  noticeable  in 
harness,  vehicles,  and  the  like.  If  a  railroad  should  pass  through  the  farm  in 
such  a  manner  as  seriously  to  interfere  with  farming  operations,  and  if  local 
markets  should  decline,  or  if  there  should  be  an  unfavorable  change  in  population 
or  local  institutions,  the  farm  may  depreciate  in  value.  And,  finally,  a  farm 
often  depreciates  in  value  by  the  abuse  of  the  soil  in  continuous  cropping,  im- 
proper cultivation,  lack  of  fertilization,  and  so  on. 

There  are  four  practical  methods  of  computing  depreciation  : 

1 .  To  list  all  property  at  proper  prices  and  deduct  a  uniform  rate  of  deprecia- 
tion, according  to  the  several  classes  of  property. 

2.  To  apply  a  uniform  rate  of  depreciation  on  a  continually  decreasing 
valuation.     For  example,  10  per  cent  on  $  100  this  year,  10  per  cent  on  $  90 
next,  10  per  cent  on  $  81  next,  and  so  on. 

3.  To  revalue  each  article  annually. 

4.  To  charge  all  replacements  to  expense  or  repairs,  and  in  this  manner 
maintain  the  original  valuation. 

A  combination  of  all  four  methods  has  been  used  in  the  exercises  in  this  set. 
In  the  first  place,  real  estate  is  not  reduced  to  show  the  decrease  in  building 
values.  The  appreciation  in  the  value  of  the  land,  due  to  improved  methods  of 
farming,  together  with  good  care  and  repairs,  will  more  than  offset  the  decrease 
in  the  value  of  the  buildings. 

It  is  found  impracticable  to  fix  a  satisfactory  rate  of  depreciation  for  the 
live  stock,  since  some  are  increasing  and  others  are  decreasing  in  value.  Hence, 
all  the  animals  are  revalued  at  each  inventory.  The  live  stock  cost  accounts 
are  charged  with  6  per  cent  on  the  valuation  of  the  houses  devoted  to  the  different 
kinds  of  animals,  together  with  a  suitable  depreciation  for  the  implements 
used  in  that  enterprise.  For  instance,  the  dairy  equipment  is  "charged  off" 
at  the  rate  of  20  per  cent,  since  it  will  probably  have  to  be  replaced  within 
five  years. 


142  FARM  ACCOUNTS 

The  case  of  implements  is  different.  From  a  careful  estimate  of  the  "life" 
of  the  various  implements  it  appears  that  an  average  of  ten  years  will  not  be  far 
wrong.  That  is,  the  total  value  of  the  implements  at  the  beginning  of  1912, 
$1236,  will  have  to  be  replaced  in  ten  years  and  hence  $123.60  is  "charged  off" 
each  year.  This  happens  to  be  almost  exactly  50^  per  acre  of  the  cultivated 
land.  Since  every  acre  will  probably  receive  about  an  equal  use  of  the  imple- 
ments, the  crops  are  charged  with  the  depreciation  at  the  rate  of  50^  per  acre. 
Next  year  it  will  be  $  225,  or  10  per  cent  on  the  total  implements  at  the  beginning 
of  1913.  This  will  be  about  65^  per  acre. 

Depreciation  is  one  of  the  most  debated  subjects  in  accounting  literature. 
This  is  perfectly  natural.  Even  with  the  same  care,  the  same  grade  of  machine 
or  horse  or  house  will  rarely  last  the  same  length  of  time  in  two  localities. 
This  is  due  to  climatic  and  other  natural  conditions  "over  which  man  has  no 
control."  Hence,  there  can  be  no  such  thing  as  standard  rates  of  depreciation. 
Attempts  have  been  made  in  this  direction,  but  all  have  failed.  Fortunately, 
however,  the  law  of  averages  comes  to  our  assistance.  Where  some  implements 
are  short  lived,  others  last  longer,  and  by  taking  a  sufficiently  long  period  and  a 
sufficiently  large  number  of  articles,  it  is  generally  possible  to  arrive  at  a  rate 
wrhich  answers  for  all  practical  purposes. 

If  it  is  desired  to  adopt  a  uniform  rate  of  depreciation,  the  following  table 
may  serve  as  a  guide  : 

Frame  buildings  2  to    5  per  cent. 

Brick  buildings  1  to    3  per  cent. 

Horses,  above  5  years  10  per  cent. 

Milch  cows,  after  3d  yr.  8  per  cent. 

Machinery  and  tools  6  to  10  per  cent. 

The  thoughtful  farmer  will  find  no  difficulty  in  adjusting  these  rates  to  suit 
his  own  conditions. 

It  will  be  found  advisable  to  recheck  the  accuracy  of  the  adopted  rate  of 
depreciation  by  making  a  complete  revaluation  every  five  or  six  years,  or  at 
any  time  when  it  is  suspected  that  the  rate  is  too  inaccurate. 


VALUATION  AND  DEPRECIATION  143 

WRITTEN  EXERCISE 
INVENTORY,  JANUARY  1,  1913 

You  will  now  record  the  annual  inventory  from  the  data  given  below. 
Review  paragraphs  on  inventory  in  lesson  44,  and  also  bear  in  mind  the  discus- 
sion on  depreciation  and  valuation  in  this  lesson.  You  will  merely  extend  the 
amounts  in  the  second  column  in  the  continuous  inventory,  which  you  provided 
in  lesson  44,  and  add  the  improvements  and  implements  recorded  in  the  cash 
payments.  There  is  only  one  other  item  to  include,  that  of  the  County  Grow- 
ers' Stock,  which  is  considered  worth  its  cost.  There  is  one  due  bill  from  Mr. 
Brown  which  was  entered  as  cash,  and  is,  therefore,  included  in  the  cash  balance. 

REAL  ESTATE.  These  items  are  the  same  as  they  were  January,  1912, 
with  the  addition  of  improvements,  including  silo  I^o.  2,  as  shown  in  the  cash 
book. 

PRODUCTS.  Wheat,  60  bu.  at  $1 ;  oats,  406  bu.  at  45^ ;  barley,  222  bu.  at 
50?f;  vetch,  22|  T.  at  $10;  clover,  22  T.  at  $11;  corn  ensilage  (estimated), 
$189;  potatoes,  243  bu.  at  60^;  fruit  and  vegetables,  $66;  artichokes,  $175; 
kale,  $50 ;  wood  and  posts,  $205. 

LIVE  STOCK.  Horses:  Brood  mares,  above  5  yr.,  6,  $1100;  driving  horses, 
3  yr.,  2,  $275 ;  colts,  5,  $650. 

Hogs:  Boar,  1,  $30;  sows,  12,  $220;  pigs,  50,  $300. 

Cattle:  Bull,  1,  $175;  cows,  25,  $1500;  heifers,  9,  $225,  calves,  12,  $180. 

Graded  Sheep :  77,  $308. 

Poultry:  Chickens,  210,  $157.50;  turkeys,  7,  $17.50;  ducks,  5,  $4.25; 
geese,  3,  $4.50. 

IMPLEMENTS  :  All  items  the  same  as  January,  1912,  with  the  additional  im- 
plements purchased,  as  shown  in  the  cash  book.  Note  that  tools  and  har- 
ness are  added  to  by  purchases  during  the  year.  All  items  are  inventoried  at 
cost,  except  those  inventoried  the  previous  year,  which  have  depreciated  10%. 
From  the  total  of  implements  as  shown  in  the  1913  column  deduct  10%  of  the 
total  implements  shown  in  the  January,  1912,  column,  and  the  remainder  will  be 
the  implements  inventory  January,  1913. 

MISCELLANEOUS.  Supplies :  nails,  twine,  oil,  etc.,  $32 ;  County  Growers' 
Association  stock,  $20 ;  cash  and  cash  items,  including  bank  balance,  notes,  and 
due  bills,  $130.90. 

LIABILITIES.  Mortgage  favor  State  School  Fund,  6%,  $4000;  interest 
due,  $40. 


144  FARM  ACCOUNTS 

LESSON  49 
SPECIAL  COST  RECORDS 

Cost  keeping  is  the  most  difficult  of  all  phases  of  accounting,  since  it  must 
deal  with  so  many  different  and  variable  elements ;  and  this  is  particularly  true 
on  the  farm.  There  is  scarcely  a  manufacturer  in  existence  who  has  so  many 
different  problems  to  contend  with  as  a  farmer  on  a  large  scale,  who  is  often  at 
once  the  producer,  the  manufacturer,  and  the  distributor.  The  farmer  must 
contend,  not  only  with  the  usual  problems  of  material,  labor,  and  capital, 
which  enter  into  the  processes  of  manufacture,  but  he  must  contend  also  with 
the  caprices  of  the  elements,  with  the  uncertain  conditions  of  the  climate,  soil, 

and  other  natural  environment. 

« 

Fortunately,  cooperation  has  done  much  to  solve  the  problems  of  farm  cost 
accounts.  Cow-Testing  Associations,  Cooperative  Creameries,  Purchasing 
Agencies,  and  Fruit  Exchanges  are  doing  much  of  the  intricate  work  necessary 
in  accurate  cost  accounting.  In  the  Cow-Testing  Associations  an  expert  makes 
the  rounds  among  a  certain  number  of  farmers,  usually  once  a  month,  tests  the 
milk,  examines  the  cows,  prescribes  rations,  checks  the  records,  and  in  countless 
ways  directs  the  dairyman  toward  better  methods  and  larger  profits.  In  the 
exercises  which  follow,  the  details  of  testing  individual  animals  are  dispensed  with, 
being  attended  to  by  the  local  Cow-Testing  Association  at  the  nominal  cost  of 
$1  per  month. 

In  cost  records,  account  must  be  taken  of  the  material,  labor,  and  capital 
used  in  production.  The  most  difficult  of  the  three  is  the  labor  record,  since  on 
the  farm  the  laborers  must  often  move  from  task  to  task  several  times  in  the 
day.  Adding  to  this  the  natural  disinclination  of  the  farmer  for  figures,  and  the 
matter  of  keeping  even  approximately  accurate  cost  records  will  be  apparent. 

It  should  be  borne  in  mind  that  the  cost  records  are  wholly  auxiliary  to  the 
financial  records,  and  that  the  latter  are  complete  without  the  former.  How- 
ever, it  is  not  possible  to  keep  accurate  cost  records  without  reliable  financial 
records,  because  of  the  financial  data  which  enter  into  costs. 

The  importance  of  the  form  of  the  records  is  often  overlooked.  In  the  first 
place,  the  form  must  be  so  arranged  as  to  require  the  least  amount  of  writing 
and  the  least  expenditure  of  time  to  keep  it  up.  It  must  also  provide  for  the 
several  elements  of  cost  so  as  to  guard  against  omissions  and  errors.  Then  the 
self-balancing  and  double-entry  features  must  be  present  so  that  the  several 


SPECIAL  COST  RECORDS  145 

accounts  or  columns  in  the  financial  accounts  may  check  with  corresponding 
columns  in  the  cost  accounts.  In  many  cases  the  total  of  an  account  checks 
with  a  number  of  accounts  in  some  other  book,  when  the  former  is  said  to  be 
the  controlling  account  of  the  .latter.  And  finally,  the  summaries  must  ex- 
hibit at  a  glance  the  information  sought  from  the  records  and  give  in  condensed 
form  past  experience  as  a  guide  in  future  operations. 

In  the  cost  records  which  follow,  an  account  is  kept  with  each  crop,  as  in- 
dicated in  the  plot,  lesson  45,  and  the  acre  is  the  unit  of  costs.  An  account 
is  kept  also  of  each  kind  of  stock.  Ordinary  journal  paper  is  used  with  a 
half-inch  column  to  the  left  of  the  money  column  for  man  labor  and  another 
for  team  labor,  as  shown  in  illustration  38,  page  150. 

The  details  of  the  labor  are  found  in  the  individual  labor  reports,  illustration 
36,  page  146,  and  only  the  number  of  hours  for  each  operation  is  entered  in  the 
cost  account.  Details  of  the  feed  consumed  by  the  stock  are  found  in  the  feed 
record,  illustration  37,  page  148,  and  only  the  total  is  entered  in  the  cost  accounts. 

As  explained  in  lesson  48,  each  crop  is  charged  with  depreciation  of 
implements  at  the  rate  of  50^  per  acre,  and,  since  the  value  of  the  land  is  $100 
per  acre,  and  the  local  interest  rate  is  6  per  cent,  each  acre  is  charged  with  $6 
interest  on  the  capital  invested.  The  stock  is  also  charged  with  6  per  cent  in- 
terest on  the  value  of  the  barns  for  housing. 

Each  cost  account  is  debited  with  the  inventory  at  the  beginning  of  the  year 
and  credited  with  what  is  left  at  the  end. 

The  question  of  how  manure  is  to  be  treated  in  the  cost  accounts  requires 
careful  consideration,  since  it  is  one  of  the  most  valuable  assets  on  the  farm  if 
properly  handled. 

One  of  the  most  thorough  discussions  of  the  value  of  stable  manure  is  found 
in  Bulletin  122  of  the  Maryland  Experiment  Station.  The  average  annual  dry 
excretion  per  animal  given  on  page  132  is  :  Cows,  10  tons ;  horses,  6  tons ;  hogs, 
1  ton.  These  figures  have  been  used  in  this  exercise  and  the  value  has  been 
estimated  at  $1.50  per  ton  delivered  on  the  field.  The  amount  of  manure  is 
as  follows :  Calves,  heifers,  and  colts  at  one  half  the  above  estimate. 

34  cattle  10  tons  each  340  tons 

10  horses  6  tons  each  60  tons 

100  hogs  1  ton  each  100  tons 

500  tons 
at  $1.50  per  ton,  which  totals  $750.     Dividing  this  by  246  acres  of  cultivated 


146 


FARM  ACCOUNTS 


land  gives  $3  per  acre  and  $12  over.  This  $12  is  charged  to  Orchard  and 
Garden  to  avoid  fractions.  The  chicken  manure  is  used  on  the  truck  garden 
and  is  estimated  at  about  $15  per  year.  The  sheep  are  charged  low  pasturage 
and  are,  therefore,  not  credited  with  the  manure. 

It  is  thought  that  this  distribution  of  the  value  of  manure  is  more  equitable 
and  simple  than  to  charge  the  particular  field  with  the  manure  as  it  is  applied, 
since  the  manure  is  used  for  the  benefit  of  the  whole  farm.  Of  course,  since  the 
stock  gets  credit  for  the  manure  delivered  on  the  field,  the  labor  and  depreciation 
of  implements  are  charged  to  the  stock. 

An  adjustment  should  be  made  in  the  rate  of  charge  per  acre,  where  the  num- 
ber of  animals  changes  sufficiently  to  warrant  it. 

WRITTEN  EXERCISE  —  A 

LABOR  REPORT  BY  H.  M.  PHILLIPS,  MARCH,  1912 

This  labor  report  for  one  laborer  for  one  month  is  given  merely  to  show  how 
the  labor  record  may  be  kept.  A  form  similar  to  the  one  shown  in  illustration 
36  should  be  prepared  for  each  laborer,  and  kept  in  a  convenient  place  where 
he  can  enter  the  number  of  hours  spent  on  each  farm  department  each  day. 
This  is  a  simple  matter,  but  to  be  of  any  value  the  report  must  be  accurately 
kept.  The  proprietor  may,  if  hje  prefers,  keep  this  record  himself,  requiring 
each  laborer  to  report  to  him  each  day. 


(XccooxA 


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^ 


Illustration  36 


NOTE.  —  The  following  data  contain  the  names  of  accounts,  date  in  paren- 
thesis, hours  of  man  labor  when  only  one  number  is  given,  and  hours  of  man 
and  horse  labor  when  two  numbers  are  given  thus,  9-9. 


SPECIAL  COST  RECORDS  147 

CATTLE  AND  DAIRY.  Man  labor  (cleaning,  salting,  etc.),  (March  6,  raining)  1 
hr.,  (12)1,  (23)4;  HORSES,  (21)3,  (22)9;  HOGS,  (16)  2,  (26)  2;  SHEEP,  (5)  1, 
(10)  1,  (24)  1,  (29)1 ;  POULTRY,  (6)  1,  (12)  3,  (15)  3;  IMPROVEMENTS,  0 ;  REPAIRS 
(General  except  as  noted)  (6)  5,  (horse  barn),  (14)  2,  (21)  6  (machinery),  (30)  3; 
WHEAT,  man  and  horse  labor  (plowing)  (26)  7-7;  OATS  (plowing),  (1)  9-9, 
(2)  9-9  (3)  9-9,  (5)  9-9,  (7)  9-9,  (8)  9-9,  (9)  9-9,  (10)  9-9,  (13)  9-9,  (14)  8-8, 
(15)  7-7  (16)  8-8,  (17)  10-10,  (19)  10-10,  (23)  5-5,  (24)  4-4;  ORCHARD  AND 
GARDEN  (6),  2,  man  labor  (12)  5,  (30)  5;  BARLEY,  man  and  horse  labor  (24) 
4-4,  (27)  9-9,  (28)  9-9,  (29)  9-9,  (31)  9-9. 

Extend  the  total  number  of  hours  under  each  account  in  the  respective  total 
columns,  as  shown  in  the  illustration.  The  total  number  of  hours  will  be  241 
man,  and  180  team  hours.  It  is  not  necessary  to  extend  this  in  terms  of  values, 
since  this  is  done  in  the  separate  cost  accounts,  as  shown  in  illustration  38. 
When  all  the  labor  records  are  compiled  for  the  different  men  for  the  year,  the 
amounts  will  correspond  to  those  entered  in  the  several  cost  accounts. 

WRITTEN  EXERCISE  —  B 

Next  reproduce  the  feed  record  as  it  was  kept  by  student.  Rule  a  sheet  of 
blank  paper  found  with  your  supplies  to  correspond  to  illustration  37,  page  148. 
You  need  one  line  for  each  crop  besides  the  headings.  Be  sure  to  have  your 
teacher  check  the  feed  record  before  taking  up  the  next  lesson. 

FEED  RECORD,  1912 

WHEAT.  Market  price,  $1  per  bushel.  Fed  to  chickens,  127  bushels. 
The  poultry  grain  bin  held  25  bushels  and  was  filled  five  times  with  two  addi- 
tional bushels  required.  The  feeder  simply  made  a  mark  in  the  quantity  column 
each  time  the  bin  was  filled.  The  computation  of  value  was  made  at  the  end 
of  the  year.  Enter  as  in  illustration  37. 

OATS.  Market  price,  45^  per  bushel.  Fed  to  cattle,  512  bushels.  The  cattle 
oat  bin  held  100  bushels  and  was  filled  five  times,  12  bushels  additional  required. 
Fed  to  horses,  312  bushels.  The  oat  bin  for  the  horses  held  100  bushels  and  was 
filled  three  times,  12  bushels  additional  required.  Fed  to  poultry  a  little  over 
120  bushels,  amounting  to  $54.15. 

BARLEY.  Market  price,  50^  per  bushel.  Fed  to  cattle,  170  bushels.  The 
cattle  barley  bin  held  50  bushels  and  was  filled  three  times,  20  bushels  additional 


148 


FARM  ACCOUNTS 


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Illustration  37 

required.  A  little  less  than  197  bushels  of  barley  were  fed  to  the  horses,  amount- 
ing to  $98.40.  Fed  to  hogs,  565  bushels.  Fed  to  poultry  a  little  over  85  bushels, 
valued  at  $40.20. 

VETCH.  Market  price,  $10  per  ton.  Fed  26  tons  to  cattle.  A  little  over 
13|  tons  were  fed  to  the  horses,  amounting  to  $135.20.  Fed  4  tons  to  sheep. 

CLOVER.  Market  price,  $11  per  ton.  Fed  a  little  over  17  tons  to  cattle, 
valued  at  $188.  A  little  over  13  tons  were  fed  to  the  horses,  amounting  to 
$145.10.  Fed  4  tons  to  sheep. 

KALE.  Estimated  at  $2.50  per  ton.  Fed  80  tons  to  cattle,  40  tons  to  hogs, 
and  10  tons  to  poultry. 

CORN  SILAGE.  Estimated  at  $3.50  per  ton.  A  little  less  than  51  tons  were 
fed  to  cattle,  valued  at  $178. 

RAPE  PASTURE.  Estimated  at  $20  per  acre.  Hogs  were  pastured,  es- 
timated value  $150.  Fed  to  sheep,  estimated  value 


COST  ACCOUNTS  OF  CROPS  149 

ARTICHOKE  PASTURE.  Estimated  value  $35  per  acre.  Fed  to  hogs  about 
half  the  crop,  estimated  value  $175. 

CLOVER  PASTURE.  Charged  at  cost.  Charged  to  cattle,  $262;  horses, 
$74.80. 

FIELD  PEAS  PASTURE.     Charged  to  hogs,  at  cost,  $156.50. 

TIMBER  PASTURE.     Pastured  sheep,  at  $1  per  head, 


LESSON  50 
COST  ACCOUNTS    OF  CROPS 

In  computing  the  number  of  tons  of  hay  for  the  inventory  the  follow- 
ing simple  rule  may  be  employed :  Subtract  the  width  from  the  over  (the 
"over"  is  the  distance  from  the  ground  on  one  side  over  the  stack  to 
the  ground  on  the  other  side) ;  divide  by  two ;  and  multiply  by  the  width 
and  then  by  the  length.  This  gives  the  number  of  cubic  feet  in  the  stack. 
To  find  the  number  of  tons,  proceed  as  follows :  For  a  stack  20  days  old, 
or  under,  divide  by  512 ;  between  20  and  60  days  old,  by  422 ;  over  60  days 
old,  by  380. 

To  find  the  amount  of  hay  in  a  mow  find  the  number  of  cubic  feet  and  divide 
by  512. 

To  find  the  number  of  bushels  of  grain  in  bins,  take  eight  tenths  (^80)  of 
the  number  of  cubic  feet.  If  the  bin  is  large,  add  one  third  of  a  bushel  for  every 
100  cubic  feet. 

The  best  practice  is  to  keep  the  general  grain  supply  separate  from 
the  feed  supply.  This  can  always  be  done  by  providing  bins  for  the 
feed  of  each  kind  of  stock,  each  holding,  say,  10,  25,  50,  or  100  bushels. 
Then  by  merely  marking  the  number  of  times  they  are  filled,  the  feed 
for  the  year  is  found  accurately  enough  for  all  practical  purposes.  See 
illustration  37. 

The  dates  at  which  the  several  operations  occur  vary  widely  in  different  local- 
ities and  are,  therefore,  omitted  from  the  memoranda.  It  will  be  an  interesting 
exercise,  however,  for  the  student  to  insert  the  dates  so  far  as  he  can  secure  them 
from  home  or  other  sources  in  his  locality.  It  is  often  an  excellent  practice  to 
add  memoranda  other  than  financial.  Such  data  are  often  of  even  greater  im- 
portance than  the  costs  and  returns. 


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COST  ACCOUNTS  OF  CROPS  151 

WRITTEN  EXERCISE 

Prepare  14  pages  of  journal  paper  by  writing  the  headings  of  each  crop  in  the 
same  manner  as  in  illustration  38.  If  not  already  provided  with  narrow  columns 
for  man  labor  and  team  labor,  rule  two  extra  columns  each  about  f  inch  wide. 
Then  prepare  each  account  from  the  memoranda  which  follow.  The  Wheat 
account  is  shown  in  illustration  38. 

1.  WHEAT  (FIELD  3a,  12  ACRES) 

NOTE.  —  "  C."  means  cash  book  entries. 

Jan.  1.  Cost  —  Inventory,  $63;  harrowing,  man  hours,  7,  team  hours,  7; 
seeding,  8-8;  cutting,  12-12;  shocking,  12-0;  marketing,  6-6;  plowing,  33- 
33;  twine  (cash),  $2.40;  threshing  300  bu.  at  6^  (C.),  $18;  82  sacks  at  10^ 
(C.),  $8.20 ;  man  labor  at  20^,  ( ?) ;  team  labor  at  20^,  ( ?) ;  seed  wheat,  $12 ; 
interest  and  depreciation,  (  ?) ;  manure,  at  $3  per  A.,  (  ?). 

Returns  —  300  bu.  wheat  at  $1. 

Disposal  —  Sales  (C.),  $164;  fed  to  poultry,  $127;  seed,  $12;  Dec.  31, 
Inventory,  $60. 

Find  the  total  cost,  returns,  and  profit.     See  illustration  38. 

2.  OATS  (FIELD  6,  52  ACRES) 

Jan.  1.  Cost  —  Inventory,  $195.75;  plowing,  143-143;  harrowing,  39-39; 
sowing,  39-39;  cutting,  45-45;  shocking,  39-0;  threshing,  10-^0;  hauling, 
20-20;  man  labor,  ( ?) ;  team  labor  ( ?) ;  twine  (C.),  $15.80;  threshing  3120 
bu.  at  4£  (C.),  $124.80;  seed  oats,  $33.60;  interest  and  depreciation,  (?) ;  ma- 
nure, ( ?). 

Returns  —  3120  bu.  oats  at  45^. 

Disposal— Sales  (C.),  $954;  seed  oats,  $38.10;  fed  to  cattle,  $230.40; 
horses,  $140.40;  poultry,  $54.15;  Dec.  31,  inventory,  $182.70. 

3.  BARLEY  (FIELDS  5a  AND  10,  33  ACRES) 

Jan.  1.  Cost  —  Inventory,  $136.50;  plowing,  91-91;  harrowing,  16-16; 
sowing,  21-21 ;  cutting,  33-33 ;  shocking,  25-0 ;  hauling,  14-14 ;  man  labor,  (  ?) ; 
team  labor,  (?) ;  twine  (C.),  $8.15;  threshing  1155  bu.  at  5£  (C.),  $57.75;  seed 
barley,  $28.30;  interest  and  depreciation,  (?);  manure,  (?). 


152  FARM  ACCOUNTS 

Returns  —  1155  bu.  barley  at  50  £. 

Disposal  —  Sales,  $68.60 ;   fed  to  cattle,  $85 ;  horses,  $98.40 ;  hogs,  $282.50 ; 
poultry,  $40.20 ;   seed,  $28.30;  Dec.  31,  inventory,  $111. 
Submit  your  work  for  approval. 

4.  VETCH  AND  RYE  (FIELD  8,  35  ACRES) 

Jan.  1.  Cost  —  Inventory,  $175;  plowing,  96-96 ;  harrowing,  26-26;  sow- 
ing, 26-26;  mowing,  31-31;  raking,  18-18;  stacking,  132-88;  hauling  45-45 ; 
man  labor,  ( ?) ;  team  labor,  (  ?) ;  rye  seed  (C.),  $12.25 ;  vetch  seed  (C.),  $63 ; 
baling  15  T.  at  $2.  (C.),  $30;  interest  and  depreciation,  (?);  manure,  (?). 

Returns  —  112|  T.  hay  at  $10. 

Disposal  —  Sales,  $639.80;  fed  to  cattle,  $260;  horses,  $135.20;  sheep, 
$40;  Dec.  31,  inventory,  $225. 

5.  CLOVER  AND  TIMOTHY  (FIELDS  4a  AND  9,  26  ACRES) 

Jan.  1.  Cost  —  Inventory,  $121 ;  mowing,  23-23;  raking,  13-13  ;  stacking, 
98-64;  hauling,  40-40 ;  man  labor,  (?);  team  labor,  (?);  seed  (C.),  $31.20; 
baling  10  T.  at  $2  (C.),  $20;  interest  and  depreciation,  (  ?) ;  manure,  (  ?). 

Returns  —  78  T.  hay  at  $11. 

Disposal  —  Sales,  $359.90;  fed  to  cattle,  $188;  horses,  $145.10;  sheep, 
$44;  Dec.  31,  inventory,  $242. 

6.  KALE  (FIELDS  36  AND  46,  6  ACRES) 

Jan.  1.  Cost  —  Inventory,  0;  plowing,  19-19;  harrowing,  6-6;  disking, 
6-6 ;  harrowing,  6-6 ;  marking,  6-0 ;  transplanting,  220-0 ;  cultivating,  54-30 ; 
harvesting,  240-120;  man  labor,  ( ?) ;  team  labor,  ( ?) ;  interest  and  depre- 
ciation, (  ?) ;  manure,  (  ?) ;  seed  (C.),  $3. 

Returns  —  150  T.  kale  at  $2.50. 

Disposal  — Fed  to  cattle,  $200;  hogs,  $100;  poultry,  $25;  Dec.  31,  in- 
ventory, $50. 

7.  CORN  (FIELD  56,  7  ACRES) 

Jan.  1.  Cost  —  Inventory,  $73 ;  plowing,  23-23 ;  harrowing,  8-8 ;  planting, 
6-6;  cultivation,  21-21 ;  cutting,  11-11 ;  hauling,  45-45;  filling  silo,  40-16; 
man  labor,  (  ?) ;  team  labor,  ( ?) ;  seed  corn  (C.),  $2.70;  twine  (C.),  $4.20;  fuel 


COST  ACCOUNTS  OF  CROPS  153 

for  engine  (C.),  $3.50;    power  machinery  (C.),  $11.20;   interest  and  deprecia- 
tion, (  ?) ;  manure,  (?). 

Returns  —  84  T.  ensilage  at  $3.50. 

Disposal  —  Fed  to  cattle,  $178;  Dec.  31,  inventory,  $189. 

8.  RAPE  (FIELD  1,  11  ACRES) 

Jan.  1.  Cost  —  Inventory,  0;  plowing,  36-36;  disking,  11-11;  harrowing, 
11-11;  planting,  50-0;  man  labor,  ( ?) ;  team  labor,  ( ?) ;  seed  (C.),  $2.55; 
interest  and  depreciation,  (  ?) ;  manure,  (  ?). 

Returns  —  Pasture  at  $20  per  acre. 

Disposal  —  Fed  to  hogs,  $150 ;  sheep,  $70. 

9.  ARTICHOKES  (FIELD  2,  10  ACRES),  (5  YEARS) 

Jan.  1.  Cost- — Inventory,  0;  plowing,  33-33;  harrowing,  6-6;  disking, 
11-11;  harrowing,  6-6;  cutting  (^),  118-10;  cultivating,  50-50;  man  labor, 
(?);  team  labor,  ( ?) ;  interest  and  depreciation,  ( ?) ;  manure,  (?). 

Returns  —  Pasture  at  $35  per  acre. 

Disposal  —  Fed  to  hogs,  $175 ;  Dec.  31,  inventory,  $175. 

10.  CLOVER  PASTURE  (FIELDS  7  AND  13,  34  ACRES) 

Jan.  1.  Cost  —  Inventory,  0;  f  T.  land  plaster  (C.),  $11;  application  man 
labor,  14-0;  interest  and  depreciation,  (  ?) ;  manure,  (?). 

Returns  —  Pasture  charged  at  cost  to  horses,  $74.80 ;  cattle,  $262. 

11.  FIELD  PEAS  (FIELD  12a,  10  ACRES,  PASTURE) 

Jan.  1.  Cost — Inventory,  0;  plowing,  33-33;  harrowing,  6-6;  disking, 
11-11;  planting,  15-15;  harrowing,  6-6 ;  man  labor,  (  ?) ;  team  labor,  (  ?) ; 
seed  peas  (C.),  $28.60;  seed  oats,  $4.50;  interest  and  depreciation,  (?); 
manure,  ( ?) . 

Returns  —  Pasture  charged  to  hogs  at  cost,  $156.50. 

12.  TIMBER  AND  PASTURE  (No.  11,  50  ACRES) 

Jan.  1.  Cost  —  Inventory,  $162 ;  cutting  wood,  330-0;  hauling  wood,  205- 
140;  'man  labor,  (  ?) ;  team  labor,  (  ?) ;  interest  and  depreciation,  (  ?). 


154  FARM  ACCOUNTS 

Returns  —  80  cords  wood  at  $4 ;   sheep  pasture, 
Disposal  —  Sold  posts  and  wood,  $227 ;  household  use,  $30 ;  sheep  pasture, 
$80;  Dec.  31,  inventory,  $205. 

13.  POTATOES  (FIELD  26,  10  ACRES) 

Jan.  1.  Cost  —  Inventory,  $150 ;  plowing,  28-28 ;  harrowing,  7-7;  disking, 
10-10;  harrowing,  7-7;  cutting  and  planting,  50-25;  cultivating,  100-100; 
spraying,  50-0;  gathering,  175-75;  sacking,  50-0;  hauling,  94-94;  man 
labor,  (?) ;  team  labor,  (?) ;  spraying  material  (C.),  $2.50;  800  sacks  at  5^  (C.) ; 
seed  potatoes,  $64.20 ;  interest  and  depreciation,  (?);  manure,  (?). 

Returns  —  1500  bu.  potatoes  at  60^. 

Disposal  —  Sales,  $815 ;  seed  potatoes,  $64.20 ;  household  use,  $25  ; 
Dec.  31,  inventory,  $145.80. 

14.  ORCHARD  AND  GARDEN  (No.  14,  If  ACRES) 

Jan.  1.  Cost  —  Inventory,  $16;  plowing  and  harrowing,  24-13;  planting, 
28-0;  cultivation,  68-39;  pruning,  25-0;  spraying,  40-0;  thinning,  20-0; 
harrowing  and  weeding,  8-2;  picking  and  packing,  139-0;  hauling  and 
marketing,  52-33 ;  man  labor,  (  ?) ;  team  labor,  (  ?) ;  seeds  and  plants  (C.), 
$4.40;  cuttings  (C.),  7o£;  boxes  and  sacks  (C.),  $28.70;  twine  and  paper  (C.), 
$5.20 ;  spraying  material,  $2.90 ;  interest  and  depreciation,  $72 ;  manure,  $27. 

Returns  —  150  boxes  apples  at  $1;  50  boxes  pears  at  $1.20;  700  Ib. 
strawberries  at  5^;  600  Ib.  blackberries  at  5^;  75  sacks  onions,  at  $1.25; 
garden  truck,  $75. 

Disposal  —  Cash  sales,  $333.25;  household  use,  $60.50;  Dec.  31,  inventory, 


From  records  kept  by  Mrs.  Phillips,  and  from  careful  estimates,  it  is  agreed 
that  the  household  used  the  following  products  from  the  orchard  and  garden : 
apples,  $20 ;  pears,  $7.20 ;  strawberries,  $10 ;  blackberries,  $7.50 ;  onions,  $5 ; 
garden  truck,  $10.80;  total,  $60.50.  Orchard  and  garden  is  credited  and 
household  debited  for  the  total. 


COST  ACCOUNTS  OF  LIVE  STOCK  155 

LESSON   51 
COST  ACCOUNTS    OF  LIVE   STOCK 

EXERCISE 

The  live  stock  cost  accounts  are  prepared  in  exactly  the  same  manner  as 
the  crop  accounts  and  require  no  further  directions.  The  memoranda  for  the 
year's  work,  omitting  certain  details,  are  given  below. 

CATTLE  AND  DAIRY 

Jan.  1.  Cost  —  Inventory,  $1940;  feed  record,  $1403.40;  labor  record, 
2800  hr.  20^f;  veterinarian  (C.),  $7;  membership  Cow-Testing  Association 
(C.),  $12 ;  interest  on  $1940  at  6  per  cent ;  depreciation  on  dairy  equipment, 
20  per  cent,  $31.20;  housing,  6  per  cent  on  $1900. 

Returns  —  Dairy  sales,  $1998.10;  cattle  sales,  $300;  2  veals  for  home 
use,  $20;  skim  milk,  120,000  Ib.  at  2o£  cwt. ;  manure,  340  T.  at  $1.50;  milk 
for  home  use,  $73 ;  Dec.  31,  inventory, 


HORSES 

Jan.  1.  Cost  —  Inventory,  $1950;  feed  record,  $593.90;  labor  record,  750 
hr.  at  20^;  shoeing  (C.),  $15;  veterinary  service  (C.),  $15;  breaking  colts 
(C.),  $90;  interest  on  $1950  at  6  per  cent;  depreciation  on  harness,  etc.,  20 
per  cent,  $35 ;  housing,  6  per  cent  on  $1000. 

Returns  —  Labor  record  crops,  $426.40 ;  labor  record  cash,  $120 ;  sold 
3  colts  at  $125;  manure,  60  tons  at  $1.50,  $90;  household  use  of  driving 
horses,  $80;  Dec.  31,  inventory,  $2025. 

HOGS 

Jan.  1.  Cost— Inventory,  $565;  feed  record,  $864;  labor,  900  hr.  at 
20^;  skim  milk,  110,000  Ib.  at  25^  cwt.;  interest  on  $565  at  6  per  cent; 
depreciation  and  sire,  3  per  cent  on  $250 ;  housing,  6  per  cent  on  $200. 

Returns  —  Sales  25,000  Ib.  at  li ;  home  use,  750  Ib.  at  7£ ;  manure, 
100  T.  at  $1.50;  Dec.  31,  inventory,  $550. 


156 


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POULTRY 

Jan.  1.  Cost  —  Inventory,  $171.25;  feed  record,  $246.35;  skim  milk, 
10,000  Ib.  at  25£  cwt. ;  labor  record,  600  hr.  at  20^;  interest  on  $171.25  at 
6  per  cent ;  housing,  6  per  cent  on  $75. 

Returns  —  Sales,  150  Ib.  chickens  at  15^;  360  Ib.  turkeys  at  20^;  200 
Ib.  ducks  at  20^;  100  Ib.  geese  at  20^;  Jan.,  185  doz.  eggs  at  45e;  Feb., 
235  doz.  eggs  at  40^ ;  Mar.,  285  doz.  eggs  at  25cf ;  April,  260  doz.  eggs  at  20cf ; 
May,  235  doz.  eggs  at  20p ;  June,  210  doz.  eggs  at  25ff ;  July,  195  doz.  eggs  at 
25^;  Aug.,  160  doz.  eggs  at  30ff;  Sept.,  85  doz.  eggs  at  35^;  Oct.,  45  doz. 
eggs  at  40^;  Nov.,  60  doz.  eggs  at  45^;  Dec.,  110  doz.  eggs  at  50p;  home 
use  (estimated),  240  doz.  eggs  at  25^;  150  Ib.  chickens  at  15j£;  manure, 
$15;  Dec.  31,  inventory,  $183.75. 

SHEEP 

Jan.  1.  Cost  —  Inventory,  $320;  feed  record,  $234;  labor  record,  100  hr. 
at  20^ ;  shearing  80  sheep  at  10^ ;  interest  on  $320  at  6  per  cent ;  housing, 
6  per  cent  on  $50. 

Returns  —  Sales,  640  Ib.  wool  at  20^ ;  80  sheep  at  $3 ;  2  sheep  at  $5 ;  home 
use,  2  sheep  at  $5;  Dec.  31,  inventory, 


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LESSON  52 
COST   SUMMARIES 

The  cost  summaries  are  merely  recapitulations  of  what  is  found  in  the  several 
cost  accounts.  They  divide  themselves  naturally  into  first  the  two  departments, 
Crops  and  Live  Stock,  and  then  each  department  shows  the  cost,  returns,  and 
the  profit  or  loss.  Take  wheat,  in  illustration  38.  The  total  cost  is  $246.40; 
enter  in  the  total  column  of  the  summary,  illustration  39  a,  then  the  inventory, 
the  labor,  and  the  other  items,  as  found  in  the  cost  accounts.  The  returns  are 
treated  in  the  same  manner.  When  all  the  crop  cost  accounts  have  been 
entered  and  totaled,  the  net  gain  or  loss  for  all  the  crops  is  found.  Similarly 
for  the  live  stock.  Not  only  that,  but  it  is  seen  that  all  the  crops  and  all  the 
returns  for  the  stock  are  accounted  for. 

The  records  of  any  business  are  kept  as  means  of  control  and  guidance  for  its 
operations.  From  the  cost  summaries  many  lessons  may  be  drawn  by  the  farm 
manager.  We  shall  not  go  into  detail,  but  consider  only  two  important  ques- 
tions. The  first  is  regarding  labor.  From  the  several  cost  accounts,  we  see  that 
3799  man  hours  were  expended  on  crops,  and  2132  team  hours.  5150  hours  were 
devoted  to  the  several  branches  of  live  stock.  The  total  man  labor  expended 
on  the  productive  end  of  the  business  was  8949  hours.  Counting  300  working 
days  to  the  year  and  ten  hours  per  day  gives  9000  hours  for  3  men,  which  in- 


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dicates  that  the  labor  was  well  employed,  even  allowing  for  the  occasional  extra 
labor.  On  the  other  hand,  the  horses  are  credited  with  only  2132  hours'  labor 
on  crops  and  600  outside  labor.  Even  allowing  for  the  time  spent  on  general 
work  and  business  trips,  this  would  indicate  that  each  team  worked  scarcely 
three  hours  per  working  day.  The  wisdom  of  using  mares  instead  of  horses  is, 
therefore,  apparent  since  a  large  share  of  the  profit  lies  in  raising  colts. 

The  timber  pasture  shows  a  loss  of  $20.  Even  though  this  may  be  expected, 
and  partly  justifiable,  it  is  subject  for  reflection.  Perhaps  it  should  be  improved 
or  put  to  better  use. 

If  it  be  asked  how  it  is  that  interest  and  depreciation  is  represented  in  the 
profit  and  loss  statement  as  a  gain,  the  answer  is  that  it  is  merely  what  is  called 
a  "transfer  entry"  since  it  will  be  seen  that  the  profits  of  crops  and  live  stock 
have  been  reduced  by  a  like  amount.  This  was  done  to  show  the  exact  results  of 
the  several  enterprises  on  the  same  basis,  as  if  it  had  been  done  on  borrowed 
capital. 

WRITTEN  EXERCISE 

The  student  will  now  insert  the  headings  on  a  sheet  ruled  like  illustrations 
39  a,  39  b,  39  c,  and  39  d  and  complete  the  summaries  by  writing  in  the  results 
in  the  several  cash  accounts.  Having  found  the  net  gain,  check  it  with  your 
instructor  before  proceeding  to  the  next  lesson. 


ANNUAL  STATEMENT 


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LESSON    53 
THE  ANNUAL  STATEMENT 

The  Annual  Statement  consists  of  summaries  of  the  year's  business,  as  shown 
in  detail  by  the  several  records.  Usually  it  consists  of  three  parts,  viz.  (a)  a 
statement  of  Resources  and  Liabilities,  (6)  a  statement  of  Receipts  and  Pay- 
ments, (c)  a  general  statement  of  Profit  and  Loss.  To  this  is  added  a  summary  of 
costs,  returns,  and  profits  of  the  several  enterprises,  where  cost  records  are  kept. 

Besides  the  information  the  statement  affords,  it  is  of  the  greatest  value  in 
assisting  the  business  man  in  forming  an  accurate  judgment  of  the  future  conduct 
of  his  business. 

Nothing  will  be  of  greater  assistance  in  determining  what  records  should  be 
kept  than  the  annual  statement,  since  it  will  show  the  defect  of  the  accounting 
system  more  clearly  than  anything  else,  and  will  often  give  a  clew  as  to  how 
the  system  may  be  simplified  and  perfected.  In  fact,  it  is  a  practice  among 
expert  accountants,  first  to  outline  the  information  desired  in  the  form  of 
an  annual  statement  and  then  devise  the  records  so  as  to  afford  the  desired 
information. 

The  annual  statement  of  Phillips  and  Student  is  exceedingly  easy  to  prepare. 
(a)  The  inventory  has  been  prepared  already,  and  in  its  connection  the  other  re- 
sources and  also  the  liabilities  are  stated.  (6)  The  financial  statement  is  taken 


160  FARM  ACCOUNTS 

directly  from  the  totals  of  the  cash  book-ledger,  (c)  The  profit  or  loss  is 
found  by  taking  the  difference  between  the  net  worth  now  and  that  of 
a  year  ago.  (d)  The  cost  summaries  are  taken  directly  from  the  cost 
accounts ;  and  (e)  from  the  financial  statement  and  the  cost  summaries  the 
statement  of  profits  and  losses  is  made  up.  It  exhibits  the  source  of  the 
profits  and  losses  in  totals,  while  the  details  are  shown  in  the  cost  summaries. 
The  correctness  of  the  profit  and  loss  statement  is  shown  by  the  fact  that 
the  net  gain  or  loss  is  the  same  as  that  shown  in  the  resource  and  liability 
statement. 

The  student  should  bear  in  mind  that  he  will  probably  be  called  upon,  in  later 
years,  to  prepare  financial  statements  for  publication.  It  may  be  in  the  capacity 
of  corporation  treasurer  or  as  a  public  servant.  In  either  case,  it  is  highly  im- 
portant to  know  how  to  prepare  a  proper  report  so  that  it  will  be  comprehen- 
sive and  easily  understood  by  the  public.  The  form  used  in  this  exercise  is 
often  seen  in  public  reports. 

WRITTEN  EXERCISE 

On  a  sheet  of  journal  paper  •  prepare  a  statement  of  receipts  and  payments 
in  the  following  form,  and  submit  it  to  your  teacher  for  approval : 

FINANCIAL  STATEMENT,  YEAR  ENDED  DEC.  31,  1912 

RECEIPTS 

Balance  on  hand,  Jan.  1 
Farm  crops 
Orchard  and  garden 
Wood  and  posts 

Total  crops 
Cattle  and  dairy 
Horses 
Hogs 
Sheep 
Poultry 

Total  stock  and  dairy 
Interest 

Total  receipts 


ANNUAL  STATEMENT  161 

• 

PAYMENTS 


Stock  and  dairy 

Crops 

Man  labor 

Improvements 

Implements 

Repairs 

General  expenses,  interest  and  taxes 

Bills  Payable 

County  Growers'  Association,  stock 

Balance  on  hand 

Total  payments 

* 

STATEMENT  OF  PROFITS  AND  LOSSES 
PROFITS 

Crops,  as  per  summary 
Live  stock,  as  per  summary 
Interest  and  depreciation  charged  to 
crops  and  live  stock 

Less  10%  on  implements 
Interest  received  (cash) 
Increase  in  supply  inventory  (inventory) 
Decrease  in  liability  interest  and  labor  (inventory) 

Total 


LOSSES 

Labor,  as  per  cash  book 
Less  charged  to  crops  and  stock  summaries 
Household  (crop  and  stock  summaries) 
Repairs  (cash) 
General  expenses  (cash) 
Net  profit    • 
Total 


162  FARM  ACCOUNTS 

PROOF 

Net  worth  as  per  inventory 
Net  worth  last  year  inventory 
Net  profit 

LESSON  54 

REVIEW   QUESTIONS 

ON  FARM  SET  II 

1 .  Why  is  the  inventory  the  most  important  record  on  the  farm  ? 

2.  What  should  be  included  in  the  inventory  and  what  should  not  be  in- 
cluded ?     Discuss. 

3.  Explain  a  convenient  method  of  taking  the  inventory. 

4.  Describe  the  continuous  inventory  and  explain  its  advantages. 

5.  What  is  the  advantage  of  organizing  the  business  into  departments  ? 

6.  Discuss  the  advantage  of  several  dates  in  taking  the  farm  inventory. 

7.  What  is  your  own  opinion  on  the  subject  ? 

8.  Describe  a  method  of  either  reducing  or  enlarging  the  plot  of  a  farm. 

9.  What  is  the  object  of  the  farm  plot  from  the  accountant's  point  of  view  ? 

10.  State  a  convenient  scale  in  drawing  acreage. 

1 1 .  How  may  farming  be  reduced  to  a  strictly  cash  business  ? 

12.  Discuss  the  advantage  of  discounting  bills,  and  illustrate  by  a  simple 
example. 

13.  How  are  the  terms  of  dealers'  bills  indicated  ? 

14.  Explain  the  importance  of  paying  definite  items  whenever  it  is  practicable 
rather  than  to  pay  on  account. 

15.  What  is  the  advantage  of  depositing  all  moneys  received  and  paying  all 
bills  by  check  ? 

16.  How  should  petty  cash  be  handled  ? 

17.  How  is  the  cash  balanced  ? 

18.  How  may  the  voucher  be  made  to  take  the  place  of  itemized  statements 
in  the  cash  book  ? 

19.  If  sales  are  made  on  time,  how  may  they  be  regarded  as  cash  items  ? 

20.  Explain  the  several  headings  of  the  distribution  columns. 

21.  What  advantage  in  forwarding  the  totals  from  page  to  page  rather  than 
the  balance  ? 

22.  How  should  columns  having  a  number  of  classes  of  entries  be  segregated  ? 


REVIEW  QUESTIONS  163 

23.  Explain  the  method  of  filing  vouchers. 

24.  Explain  the  voucher  check  and  its  advantages. 

25.  Why  are  household  and  personal  expenses  excluded  from  the  business 
accounts  ? 

26.  What  important  questions  arise  in  connection  with  the  annual  inventory  ? 

27.  On  what  does  the  actual  value  of  any  business  depend  ?     Illustrate. 

28.  Wny  does  sentiment  sometimes  influence  the  valuation  of  property  ? 

29.  Is  this  legitimate ?    Why? 

30.  What  value  should  be  placed  on  stock  and  farm  produce  ? 

31.  Define  depreciation  and  point  out  four  causes. 

32.  Give  a  simple  example  showing  the  method  of  computing  depreciation. 

33.  How  is  depreciation  the  result  of  new  inventions  and  of  style  ?    Discuss. 

34.  Explain  four  practical  methods  of  computing  depreciation. 

35.  Why  is  it  impracticable  to  fix  a  satisfactory  rate  of  depreciation  from  live 
stock  ? 

36.  Explain  the  methods  of  fixing  depreciation  from  implements  and  how 
may  this  be  applied  to  crops  in  cost  accounts  ? 

37.  What  difficulties  in  fixing  permanent  rates  of  depreciation  ? 

38.  Give  some  rates  of  depreciation  wrhich  are  commonly  used. 

39.  How  should  the  rate  be  corrected  ? 

40.  Why  is  cost  keeping  the  most  difficult  of  all  phases  of  accounting  ? 

41.  What  agencies  are  cooperating  with  the  farmers  in  this  subject  ? 

42.  What  difficulties  in  the  way  of  computing  exact  labor  records  ? 

43.  Discuss  the  relations  between  financial  records  and  cost  records. 

44.  Give  several  reasons  why  the  form  of  records  is  important. 

45.  Discuss  the  basis  upon  which  the  interest  to  be  charged  against  the  crops 
is  found. 

46.  Why  are  the  inventories  debited  at  the  beginning  of  the  year  and  credited 
at  the  end  ? 

47.  Give  several  reasons  why  barn  manure  is  an  important  subject. 

48.  Prepare  a  statement  for  the  next  recitation  of  how  this  is  handled  on  some 
farm  you  know. 

49.  Prepare  an  example  illustrating  a  simple  rule  for  finding  the  amount  of 
hay  in  a  stack.     In  a  mow.     (You  will  find  it  more  interesting  to  take  an  actual 
stack  or  an  actual  mow  if  one  is  accessible.) 

50.  Discuss  two  methods  of  computing  the  number  of  bushels  in  grain  bins 
and  bring  in  an  illustrative  example. 


164  FARM  ACCOUNTS 

51.  Describe  the  process  of  preparing  the  cost  summaries. 

52.  How  are  they  balanced  and  proved  ? 

53.  What  important  conclusions  may  be  drawn  from  these  summaries  ? 

54.  Discuss  several  besides  those  discussed  in  the  lesson. 

55.  Explain  how  interest  can  be  a  profit. 

56.  Has  any  one  paid  this  to  the  firm  ?     If  so,  why  ? 

57.  Discuss  fully  the  annual  statement,  its  form  and  importance. ' 

58.  How  is  the  statement  prepared  ? 


FARM  IMPLEMENT  BUSINESS  165 

LESSON  55 
FARM  IMPLEMENT  BUSINESS 

It  is  the  object  of  this  set  to  acquaint  the  student  with  a  method  of  keeping 
books  suitable  for  any  ordinary  mercantile  business.  The  books  of  original 
entry  used  are  journal,  cash  book,  purchase  book,  and  sales  book. 

All  cash  transactions  will  be  entered  in  the  cash  book  —  cash  received  on  the 
left  page,  and  cash  paid  out  on  the  right  page,  as  shown  in  illustration  40, 
pages  166  and  167.  No  cash  account  will  be  kept  in  the  ledger  as  all  cash 
debits  and  all  cash  credits  appear  in  the  cash  book,  and  the  difference  between 
the  two  sides  of  the  cash  book  will  be  the  cash  balance.  The  cash  book  is  in 
reality  a  detached  ledger  account.  In  making  a  trial  balance,  therefore,  the 
cash  balance  will  be  taken  from  the  cash  book. 

You  will  note  that  when  cash  is  received,  cash  is  debited  by  making  your 
entry  on  the  debit,  or  left,  side  of  your  cash  book,  and  the  account  to  be  credited 
is  written  in  the  column  indicated  by  the  heading.  When  cash  is  paid  out,  cash 
is  credited  by  making  the  record  on  the  credit,  or  right,  side  of  the  cash  book, 
and  the  account  to  be  debited  is  written  in  the  appropriate  column  as  indicated 
by  the  heading. 

All  sales  will  be  entered  in  the  sales  book,  except  small  cash  sales,  as  in  illus- 
tration 41,  page  168.  At  the  end  of  each  month  the  total  of  the  sales  for  the 
month  is  carried  to  the  credit  side  of  the  merchandise  account  in  the  ledger  as 
in  illustration  41,  page  168.  Each  person  whose  name  appears  in  the  sales 
book  will  be  debited  in  the  ledger  for  the  amount  of  his  purchase.  Since 
merchandise  is  credited  only  once  a  month  instead  of  each  time  a  sale  is  made, 
much  space  is  saved  in  the  merchandise  account  and  much  time  is  saved  in  post- 
ing the  sales  entries.  Another  advantage  of  the  sales  book  is  that  from  it  one 
can  ascertain  the  total  sales  for  each  month,  or  for  any  period  that  may  be  desired. 

All  purchases  are  entered  in  the  purchase  book  as  in  illustration  42,  page 
169.  The  total  of  the  purchase  book  is  carried  once  a  month  to  the  debit  side 
of  the  merchandise  account  in  the  ledger  as  shown  in  the  illustration  on  page  169. 
Each  purchase  is  credited  to  the  account  of  the  person  of  whom  it  was  purchased. 
By  this  method  of  recording  purchases,  time  and  space  are  saved,  as  was  ex- 
plained in  connection  with  the  sales  book. 

All  transactions,  except  sales,  purchases  and  cash  transactions  are  recorded 
in  the  journal,  in  the  form  shown  in  illustration  10,  page  38. 


166 


FARM  ACCOUNTS 


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Illustration  42 

George  Watson  has  decided  to  purchase  the  farm  implement  business  of 
James  Grayson,  389  West  Main  St.,  in  your  city.  As  a  result  of  negotiations 
Mr.  Grayson  has  offered  to  sell  his  business  to  Mr.  Watson,  including  stock, 
fixtures,  and  good  will,  for  $  5000  in  cash.  The  latter  accepts  this  offer  and  it  is 
agreed  that  Mr.  Grayson  is  not  to  enter  into  competition  with  Mr.  Watson 
for  a  period  of  ten  years.  By  "good  will"  is  meant,  the  established  trade 
of  a  business  and  one  who  sells  his  "good  will"  either  expressly  or  impliedly 
agrees  to  do  nothing  to  attract  his  old  customers  away  from  the  business  he 
is  selling. 

A  new  lease  of  the  store  has  been  taken,  and  a  monthly  rental  of  $  50  is 
to  be  paid  Charles  Sumner,  the  owner. 

Student  has  been  engaged  to  keep  the  books  and  take  charge  of  the  other 
office  duties  at  a  monthly  salary  of  $  50. 

Walter  Williams  has  been  hired  to  clerk  in  the  store  at  a  weekly  salary  of 


170  FARM  ACCOUNTS 

When  sales  are  made  a  sales  slip  is  made  out  by  the  one  making  the  sale. 
One  copy  goes  to  the  customer  and  the  other  is  filed  numerically.  If  reference 
is  made  to  the  sales  slip  number  in  the  books  it  is  generally  unnecessary  to  copy 
the  items  into  the  sales  book. 

Invoices  of  merchandise  bought  are  checked  up  and  approved  by  Mr.  Watson, 
and  then  turned  over  to  the  bookkeeper  who  enters  and  files  them.  Memoranda 
giving  all  necessary  details  of  the  day's  transactions  will  be  furnished  the 
bookkeeper  each  day. 

Mr.  Watson  makes  all  payments  and  attends  to  all  financial  matters. 

All  money  will  be  deposited,  and  all  payments  will  be  made  by  check. 

R.  E.  Davidson  was  employed  to  make  an  appraisal  of  the  stock,  and  store 
fixtures  and  he  has  submitted  the  following  report  which  has  been  approved  by 
Mr.  Watson : 

Merchandise  — 

1  wheel  plow  $  35.  $  35. 

4  walking  plows  12.  48. 
3  spring  tooth  harrows  15.  45. 

5  cultivators  8.  40. 
3  wide  tire  trucks  75.  225. 

2  wagon  boxes  18.  36. 

6  spring  seats  2.  12. 
2  grain  drills  110.  220. 
1  grain  binder  120.  120. 
1  corn  binder  100.  100. 
1  straight  tooth  drag  12.  12. 

1  disk  harrow  35.  35. 

2  shovel  plows  3.  6. 
2  manure  spreaders  150.  300. 
2  mowers  40.  80. 

2  hay  rakes  25.  50. 

3  hay  forks  —  complete  25.  75. 

1  steel  roller  24.  24. 

2  potato  diggers  130.  260. 
1  hay  tedder  35.  35. 
1  corn  harvester  100.  100. 
1  ensilage  cutter  40.  40. 


FARM  IMPLEMENT  BUSINESS  171 

1  stump  puller  150.  150. 

1  spraying  outfit  15.  15. 
25  milk  cans                                                                   1.50             37.50 

2  corn  shelters  10.  20. 

3  farm  scales  15.  45. 

2  seed  cleaners  40.  80. 
hand  tools                                                                                 450.60 

Total  at  list  prices  $  2696.10 

Less  20  per  cent  539.22 

$2156.88 
Furniture  and  Fixtures  — 

1  roll  top  desk  $  30.  $  30. 

1  bookkeeper's  desk  48.                 48. 

1  flat-top  desk  18.                  18. 

1  safe  125.  125. 

3  showcases  20.                 60. 
8  chairs  3.                 24. 
1  counter  — 12  ft.  35.                  35. 

5  sections  —  top  and  base  —  files  3.50  17.50 

1  Underwood  typewriter  75.  75. 

1  table  8.  8. 

miscellaneous  items  38. 

$478.50 

It  is  customary  in  beginning  a  business  to  write  a  complete  explanation  that 
will  show  all  the  important  facts  regarding  investment,  employees,  salaries,  rent, 
etc.  From  the  data  given  above  write  an  appropriate  explanation  on  the  first 
page  of  your  journal. 

Mr.  Watson  invests  $  3000  in  addition  to  the  $  5000  paid  Mr.  Grayson. 

As  all  outstanding  accounts  on  the  books  of  James  Grayson  are  to  be  collected 
by  him  personally,  the  only  opening  entry  necessary  in  Mr.  Watson's  books  will 
be  a  journal  entry  as  follows : 

V/Cash  $3000. 

Mdse.  2156.88 

Furniture  and  Fixtures  478.50 

Good  Will  2364.62 

George  Watson  $  8000. 


172  FARM  ACCOUNTS 

The  cash  is  checked  in  cash  book  and  journal  so  that  it  will  not  be  posted.     It 
should  be  entered  on  the  debit  side  of  the  cash  book  as  "cash  on  hand." 

TRANSACTIONS 

1  —  Jan.       2  —  Paid  Hiram  Walker  one  month's  rent  by  check. 

2  —  Jan.       3  —  Paid  R.  E.  Davidson  for  appraisal  services,  $  5. 

3  —  Jan.       4  —  Paid  City  Book  Store's  invoice  for  books,  stationery,  and 

office  supplies,  $  122.60. 

4  —  Jan.       5  —  Paid  the  Rural  Weekly  Journal's  bill  for  printing  announce- 

ments of  the  purchase  of  the  business  by  Mr.  Watson,  $  10.50. 

5  —  Jan.       6  —  Sold  Arthur  Hillman  a  wide-tire  truck  for  cash,  $  75.     (Sales 

book  and  cash  book.) 

6  —  Jan.       7  —  Sold  hand  tools  and  miscellaneous  articles  for  cash,  $  76.80. 

(Cash  book.) 

7  —  Jan.       8  —  Sold  to  J.  F.  Painter,  one  cultivator,  $  8 ;    1  walking  plow, 

$  12 ;  1  wagon  box,  $  18.  Received  one  half  in  cash 
and  4  months'  note  for  the  balance.  (Sales  book,  cash 
book,  and  journal.) 

8  —  Jan.       9  —  Bought  of  Excelsior  Tool  Co.,  Mobile,  111.,  invoice  of  Jan.  5, 

1  disk  harrow,  $  28 ;  1  straight  tooth-drag,  $  10.  Terms, 
5  per  cent  30  days,  4  months  net.  (Purchase  book.) 

9  —  Jan.     11  —  Bought  of  Farmers'  Supply  Co.,  Fort  Wayne,  Ind.,  invoice 

of  Jan.  9,  1  doz.  plow  points  at  $12;  2  doz.  steel 
hoes  at  $3.60;  ^  doz.  steel  spades  at  $7.20.  Terms,  on 
account,  30  days. 

10  —  Jan.     12  —  Sold  to  Wallace  Carter  on  account,  1  manure  spreader,  $  150 ; 

1  shovel  plowr,  $3;  1  potato  digger,  $  130. 

11  —  Jan.     14  —  Cash  sales  of  small  hand  tools  to  date,  $  62.80. 

12  —  Jan.     15  —  Paid  Walter  Williams  two  weeks'  salary  by  check. 

13  —  Jan.     16  —  Sold  Harvey  Cross  on  account,  1  spring  seat,  $  2  ;    1  wagon 

box,  $  18 ;  1  corn  harvester,  $  100 ;  1  manure  spreader,  $  150. 

14  —  Jan.     18  —  Sold  Warren  Sterling  on  his  3  months'  note,  1  grain  drill, 

$  120.     (Sales  book  and  journal.) 

15  —  Jan.     21  —  Bought  of  General  Farm   Implement   Co.,   Dayton,   Ohio, 

invoice  dated  Jan.  18,  3  cream  separators  at  $  30.  Gave 
check  for  one  half,  and  3  months'  note  for  the  balance. 
(Purchase  book,  cash  book,  and  journal.) 


FARM   IMPLEMENT  BUSINESS  173 

16  —  Jan.     25  —  Cash  sales  of  small  tools  reported  by  Mr.  Williams,  $  96.75. 

17  —  Jan.     27  —  Sold  George  Granger  on  his  30-day    note,   1    wheel    plo\v, 

$  35 ;   1  spraying  outfit,  $  15. 

IS  —  Jan.  29  —  Sold  James  Harrison  on  account,  2  walking  plows  at  $  12  ; 
1  spring-tooth  harrow,  $15;  1  wide-tire  wagon  truck, 
$  75 ;  1  hay  rake,  $  25. 

19  —  Jan.     31  —  Cash  sales  to  date,  $  89.75. 

20  —  Jan.     31  —  Paid  Strong  Carting  Co.  by  check,  for  cartage  during  the 

month,  $  15.     (Debit  Freight  &  Cartage.) 

21  —  Jan.     31  —  Paid  S.  Wood,  bookkeeper,  salary  for  month  by  check. 

22  —  Jan.     31  —  Paid  Walter  Williams  two  weeks'  salary  by  check.     You  will 

now  close  your  cash  book,  as  in  illustration  40. 
Submit  your  cash  book  to  your  teacher  for  approval. 

POSTING 

Open  accounts  as  follows :  George  Watson,  Prop.,  one  fourth  page ;  Merchan- 
dise, one  half  page ;  Bills  Receivable,  Bills  Payable,  Expense,  Furniture  and 
Fixtures,  each  one  third  page ;  all  other  accounts  one  fourth  page. 

Post  the  journal  entries  for  January  in  the  same  manner  as  you  have 
done  in  the  preceding  exercises.  Remember  to  post  all  debits  first  and 
then  all  credits;  also  remember  to  place  the  page  of  the  ledger  account  in 
the  folio  column  at  the  left  of  each  entry  in  the  original  entry  books  when  you 
post. 

Post  each  sale  in  the  sales  book  to  the  debit  of  the  person  to  whom  the  sale 
was  made,  and  the  total  sales  for  the  month  to  the  credit  ,of  merchandise,  as 
indicated  in  illustration  41,  page  168.  Remember  that  all  accounts  on  the 
left-hand  side  of  the  cash  book  are  to  be  credited  for  their  respective  amounts, 
and  all  accounts  on  the  right-hand  side  of  the  cash  book  are  to  be  debited  for 
the  amounts  indicated. 

After  completing  your  posting,  foot  all  the  accounts  in  the  ledger,  and 
ascertain  the  balance  of  each  account  by  subtracting  the  smaller  from  the  larger 
side  in  pencil  figures  on  the  side  of  the  account  which  is  the  larger,  as  in  illustra- 
tion 11,  pages  41,  42,  and  43.  Make  a  trial  balance,  using  balances. 

Submit  your  trial  balance  to  your  teacher  for  approval. 


174  FARM  ACCOUNTS 

TRANSACTIONS  —  Continued 

23  —  Feb.       1  —  Paid  Hiram  Walker  rent  for  Feb. 

24  —  Feb.       1  —  Paid  Lehigh  Coal  Co.'s  bill  for  coal,  $  70. 

25  —  Feb.       3  —  Sold  Walter  Jones  on  his  60-day  note,  1  corn  sheller,  $  10 ; 

1  farm  scales,  $  15. 

26  —  Feb.       4  —  Paid  Excelsior  Tool  Co.'s  invoice  of  the  5th  ult.  less  5  per  cent 

discount. 

27  —  Feb.       5  —  Sold  Warren  Sterling  for  cash,  1  cream  separator,  $  40. 

28  —  Feb.       6  —  Bought  of  Central  Tool  Co.,  Madison,  Wis.,  invoice  of  Feb. 

1, 2  walking  plows  at  $  10;  2  wagon  boxes  at  $  15;  1  wide 
tire  truck,  $  60.     Terms,  T20,  ^V,  n/60. 

29  —  Feb.       8  —  Paid  Walter  Williams  one  week's  salary  by  check. 

30  —  Feb        8  —  Paid  Farmers'  Supply  Co.'s  invoice  of  the  9th  ult.  due  to-day 

by  check. 

31— Feb.     10  — Paid   freight   bills    by   check,    $61.30.     (Debit   Freight  & 
Cartage.) 

32  —  Feb.     11  —  Paid  Central  Tool  Co.'s  invoice  of  the  1st  inst.  less  2  per  cent 

discount  by  check. 

33  —  Feb.     11  —  Paid  Home  Electric  Light  Co.'s  bill  for  January  by  check,  $6.50. 

34  —  Feb.     12  —  Cash  sales  of  small  items  to  date,  $  186.90. 

35  —  Feb.     14  —  Bought  of  the  A.  B.  Granger  Co.,  Kansas  City,  Mo.,  invoice 

of  Feb.  10,  1  manure  spreader,  $  120.     Terms,  60-day  note. 

36  —  Feb.     15  —  Sold  James  Harrison  10  milk  cans  at  $  1.50 ;  1  steel  roller,  $  24 ; 

1  hay  fork  —  complete,  $25.     Received  cash  in  full. 

37  —  Feb.     17  —  Sold  James  L.  Bristol,  1  grain  drill,  $  1 10 ;  1  grain  binder,  $  120. 

Received  one  half  in  cash  and  note  at  3  months  for  the 
balance. 

38  —  Feb.     18  —  Paid  Walter  Williams  one  week's  salary  by  check. 

39  —  Feb.     20  —  Discounted  James  L.  Bristol's  note  of  the  17th  inst.  at  the 

State  Bank  and  received  credit  for  the  proceeds. 

40  —  Feb.     22  —  Cash  sales  of  small  tools  to  date  $  169.40. 

41  —  Feb.     23  —  Sold  David  Mason  on  account  1  stump  puller,  $  150 ;  1  seed 

cleaner,  $  40 ;  1  potato  digger,  $  130. 

42  —  Feb.     25  —  Paid  my  note  of  the  14th  inst.,  favor  of  A.  B.  Granger  &  Com- 

pany, less  discount  to  maturity. 

43  —  Feb.     26  —  Received  cash  from  George  Granger  for  his  note  of  the 

27th  ult.  due  to-day. 


REVIEW  QUESTIONS  175 

44  —  Feb.     27  —  Received  cash  from  James  Harrison  to  apply  on  account,  $  50. 

45  —  Feb.     28  —  Sold  Walter  Jones,  on  3  mos.  note,  1  manure  spreader,  $  150. 

46  —  Feb.     28  —  Bought  of  Henry  Clay  &  Son,  St.  Paul,  Minn.,  1  steel  roller, 

$  20 ;  1  spraying  outfit,  $  12.     Terms,  on  account. 

47  —  Feb.     28  —  Paid  Walter  Williams  one  week's  salary  by  check. 

48  —  Feb.     28  —  Paid  S.  Wood,  bookkeeper,  salary  for  month. 

49  —  Feb.     28  —  Paid  Strong  Carting  Company,  by  check,  for  cartage  during 

month,  $  19.50. 

You  will  now  post  the  cash  book,  sales  book,  purchase  book,  and  journal 
exactly  as  you  did  at  the  end  of  the  preceding  month.  Check  your  posting. 

Balance  your  cash  book  as  you  did  at  the  end  of  January. 

Find  the  balance  of  each  account  in  your  ledger,  making  the  computation  in 
lead  pencil  on  the  larger  side  of  each  account.  Then  make  a  trial  balance,  using 
the  balances. 

You  will  now  submit  your  trial  balance  and  books  of  original  entry  to  your 
teacher  for  approval. 

WTien  they  are  returned  you  will  make  out  statements  of  resources  and  liabil- 
ities and  losses  and  gains  exactly  as  you  did  in  lesson  14.  The  inventories  are  as 
follows :  Merchandise  $  1043.10,  Furniture  &  Fixtures  $  158.67,  Expense  $  180. 

After  you  have  completed  the  statements  you  will  close  your  ledger  as  you 
did  in  lessons  15,  22,  23.  Remember  that  the  inventories  are  all  resource  inven- 
tories and  therefore  should  be  entered,  first  on  the  credit  side  of  their  respective 
accounts,  and  then  on  the  debit  side  after  the  accounts  have  been  closed. 

Compare  the  present  worth  which  was  obtained  in  your  statement  of  resources 
and  liabilities  with  the  present  worth  obtained  by  closing  the  loss  and  gain 
accounts  in  the  ledger. 

Close  all  personal  accounts,  except  those  with  only  one  entry. 

Hand  your  work  to  your  teacher  for  approval. 

LESSON   56 
REVIEW    QUESTIONS 

LESSON  55 

1.  In  what  ways  does  the  "mercantile"  business  differ  from  the  farm 
business  ? 


176  FARM   ACCOUNTS 

2.  What  books  of  original  entry  are  used  in  this  set  ? 

3.  Where  were  all  the  cash  transactions  entered  ?     Why  ? 

4.  Why  was  no  cash  account  kept  in  the  ledger  ? 

5.  In  making  the  trial  balance  where  was  the  cash  balance  obtained  ? 

6.  If  you  were  told  that  in  recording  a  given  transaction  cash  must  be 
debited  in  the  cash  book,  on  which  side  would  you  make  the  record  ?    Why  ? 

7.  Where  and  how  were  all  sales  entered  in  this  set  ? 

8.  Explain  the  advantage  of  the  sales  book.     The  cash  book. 

9.  Where  and  how  were  the  purchases  entered  ? 

10.  Explain  the  advantage  of  the  purchase  book. 

11.  What  use  is  made  of  the  journal  in  this  set  ? 

12.  What  is  a  sales  slip  and  how  is  it  used  ? 

13.  What  are  an  appraiser's  duties  ? 

14.  What  record  should  be  made  on  the  first  page  of  the  journal  before 
entering  any  of  the  transactions  ? 

15.  Explain  how  the  cash  is  proved. 

16.  Explain  how  the  cash  book  is  closed. 

17.  How  is  the  cash  book  posted  ?     The  sales  book?     The  purchase  book? 

18.  In  closing  your  ledger  what  did  you  do  with  the  resource  inventories  ? 

19.  In  what  two  ways  did  you  ascertain  the  present  worth  ? 

20.  What  is  the  object  of  closing  the  ledger  at  stated  periods  ? 


INDEX 


Account,  basis  of  bookkeeping   

.     par. 

50 

PAGE 
32 

Account,  closing  of  an        

.     par. 

86 

51 

Account,  defined        

.     par. 

45 

31 

Account,  purchase  on         ....... 

.     par. 

43 

30 

Allowance,  rules  for  journalizing        ..... 

.     par. 

54 

35 

Analysis  of  profits  and  losses      

.     les. 

39 

106 

Annual  statement,  farm     .         .         

.    les. 

53 

159 

Balance  sheet,  defined        ....... 

.     par. 

77 

50 

Balance  sheet,  six  column           ...... 

.     les. 

24 

60 

Bank  account,  how  to  open        

.     par. 

105 

68 

Bank  book          ......... 

les. 

30 

69 

Bank  draft          '     . 

par. 

124 

82 

Banking    .          ......... 

les. 

30 

68 

Bank,  its  functions     ........ 

.     par. 

107 

71 

Bank  pass  book,  proof        ....... 

.     les. 

38 

102 

Bills  Payable,  defined         

.     par. 

101 

63 

Bills  Payable,  rules  for  journalizing            .... 

.     par. 

103 

63 

Bills  Receivable,  defined    

.     par. 

101 

63 

Bills  Receivable,  rules  for  journalizing       .... 

.     par. 

102 

63 

Bookkeeping  definition  of           ...... 

.     par. 

2-4 

7 

Bookkeeping,  object  of       ....... 

.'   par. 

4 

7 

Business  forms           

.    les. 

34 

79 

Business  letter            

.     les. 

32 

73 

Business,  The,  defined  (illustrative  examples)    . 

.     par. 

53 

33 

Business  transaction,  defined     ...... 

.     par. 

1 

7 

Cash,  defined     ......... 

par. 

42 

30 

Cash  book          ......... 

.  •  par. 

16 

13 

Cash  book,  farm         

.    les. 

38 

98,99 

Cash  book  —  ledger,  farm  set  II         .         .  ' 

.    les. 

46 

123 

Cash  book,  special  column         

.     par. 

14 

10 

Cash  report        ......... 

par. 

15 

13 

Cash  statement,  farm 

.    les. 

38,  39 

102,  103 

Cash  summary           ........ 

.    les. 

39 

105 

Charged,  meaning  of          

.     par. 

53 

32 

Check,  as  receipt        

.     par. 

104-105 

68 

Check,  certified          ........ 

.    par. 

109 

71 

Check,  defined            ........ 

.    par. 

122 

80 

Check,  illustrated       

.    les. 

30 

70 

Check  book,  illustrated      

.    les. 

30 

70 

Columnar  books         

.    par. 

13 

9 

Compound  journal  entry            ...... 

.    par. 

64 

46 

Continuous  annual  statement    

.     les. 

37 

96 

Contract,  defined       

.     par. 

126 

86 

Contracts,  Statute  of  Frauds  requirements 

.     par. 

126 

86 

177 

178 


INDEX 


Controlling  account   

.    les. 

49 

Corrections,  method  of  making  

.    par 

65 

Cost            

.    par. 

39 

Cost  accounting         ' 

.    par. 

28 

Cost  records       

.    les. 

49 

Cost  records,  importance  of  form       

.    les. 

49 

Cost  records  of  crops          

.    les. 

50 

Counter  books,  for  farm  sales    

.    les. 

40 

Coupons,  for  farm  sales     

.    les. 

40 

Credit        

.     par. 

43-52 

Credit,  purchase  on    

.     par. 

41 

Crop  records      

.    les. 

50 

wheat     

.    les. 

50 

oats        

.    les. 

50 

barley     

.    les. 

50 

vetch      

.    les. 

50 

rye         

.    les. 

50 

clover     .......... 

.    les. 

50 

timothy           

.    les. 

50 

kale        

.    les. 

50 

corn        

.    les. 

50 

rape        

.    les. 

50 

artichokes       

.    les. 

50 

clover  pasture         .        .        .        . 

.    les. 

50 

field  peas        ......... 

.    les. 

50 

timber  and  pasture          ....... 

.    les. 

50 

potatoes          ......... 

.    les. 

50 

orchard  and  garden         ....... 

.    les. 

50 

Crops,  feed,  how  measured  or  estimated    .... 

.    les. 

50 

Debit          

.    par. 

43-52 

Debiting  and  crediting,  rules  for        ..... 

.    par. 

44 

Depositing,  importance  of  prompt     

.    par. 

108 

Deposit  ticket,  illustrated           ...... 

.    les. 

30 

Depreciation      

.    par. 

37 

Depreciation,  defined         

.     les. 

48 

Depreciation,  methods  of  computing 

.     les. 

48 

Depreciation,  table  for  computing      .         .         . 

.    les. 

48 

Desk,  office        

.    par. 

127 

Discounting  notes      

.    par. 

110 

Double  Entry,  defined        

.     par. 

46-49 

Double  ruling,  significance  of     

.    par. 

89 

Egg  record         

.    par. 

33 

Entry,  defined    

.    par. 

62 

Errors,  locating  in  trial  balance          

.    par. 

71 

Estimates  of  household  expenses        

.    par. 

21 

Expense  account,  explained        

.    par. 

75 

Farm  accounts  with  persons      ...... 

.    les. 

40 

Farm  plot  —  set  I      

.    les. 

37 

Farm  plot  —  set  II    

.    les. 

45 

Farm  set  I          ..... 

.    les. 

36 

PAGE 
145 

46 
27 
22 
144 
144 
149 
107 
107 
30-33 
30 
150 
151 
151 
151 
152 
152 
152 
152 
152 
152 
153 
153 
153 
153 
153 
151 
154 
149 

30-33 

31 

71 

69 

26 

140 

140 

142 

87 

71 

32 

52 

24 
46 
49 
17 
49 

107 
95 

122 
91 


INDEX 


179 


Farm  set  II        .                 

.    les. 

43 

PAGE 
113 

Feed  record        ... 

.     les. 

49 

147 

File,  box    .        .--.•'      

.     par. 

127 

87 

Filing  bills          .                          .     •    .                 ... 

.    par. 

25 

18 

Filing  vouchers,  method  of         

.    les. 

46 

126 

Financial  statement            .         .         .         . 

.     par. 

40 

27 

Financial  statement,  farm          

.    les. 

36-53 

92 

Food  record       ......... 

.     par. 

33 

24 

Form,  importance  of          

.     par. 

57 

36 

Forwarding  totals      

.     par. 

19 

14 

Gain,  defined     

.     par. 

35,81 

26,  50 

Gross  cost,  defined     

.     par. 

39 

27 

Household  accounts           

.     par. 

20 

17 

Indexing    ,         .         . 

.     par. 

68 

48 

Indorsement,  blank    

.     par. 

122 

80 

Indorsement,  full       ........ 

.     par. 

122 

80 

Indorser,  contract  of          .         .         .         . 

.     par. 

105E,  122 

70,80 

Indorser,  irregular,  defined         

.     par. 

122 

80 

Indorser,  regular,  defined            ...... 

.     par. 

122 

80 

Inventory           ......... 

.     les. 

44 

115 

Inventory,  a  liability          

.     par. 

36 

26 

Inventory,  a  resource         

.     par. 

36 

26 

Invoice,  blank  pads    

.     par. 

120 

79 

Invoice,  defined          ........ 

.     par. 

120 

79 

Irregular  indorser,  defined          ...... 

.     par. 

122 

80 

Journal,  illustrated    

.     les. 

10 

38-40 

Journalizing,  defined          

.     par. 

61 

46 

Labor  report      ......... 

.    les. 

49 

146 

Ledger,  defined           ........ 

.    par. 

51 

32 

Ledger,  illustrated      

.    les. 

11 

41-43 

Ledger,  object  of  closing    

.    par. 

85 

51 

Ledger,  Rockefeller's          ....... 

.     par. 

14 

9 

Letter,  accompanying  inclosures        ..... 

.     par. 

118 

77 

Letter,  form  of           

.    par. 

115,116 

75,76 

Letter,  ordering  goods        

.     par. 

117 

76 

Letter,  parts  of           ........ 

.     par. 

114 

74 

Letterhead          

.    par. 

112 

73 

Liability,  defined        .         

.    par. 

34,80 

26,  50 

Live  stock  records      ........ 

.     les. 

51 

155 

cattle  and  dairy      ........ 

.    les. 

51 

155 

horses     

.     les. 

51 

155 

hogs        .......... 

.    les. 

51 

155 

poultry           ......... 

.     les. 

51 

156 

sheep      

.    les. 

51 

156 

Loss,  defined      

.     par. 

35,81 

26,  50 

Maker  of  a  note,  defined    

.     par. 

98 

63 

Manure,  how  treated  in  cost  accounts        .... 

.    les. 

49 

145 

180  INDEX 


Materials  for  bookkeeping  work         .... 

.    par. 

6 

PAGE 

8 

Maturity  of  a  note,  how  found           .... 

.    les. 

28 

66 

Merchandise,  defined          

.    par. 

41 

30 

Net  cost,  defined        

.    par. 

39 

27 

Net  present  worth,  defined         

.    par. 

38 

26 

Net  worth,  defined     

.    par. 

78 

50 

Note,  promissory       

.     par. 

97    . 

63 

Office  equipment        .         .         .         .         . 

.     par. 

127 

87 

Original  entries           ....... 

par. 

5,62 

7,  46 

Paging,  explained       

.     par. 

67 

48 

Partnership  agreement       

.     les. 

43 

113 

Payee,  of  a  note,  defined    . 

.     par. 

'98 

63 

Personal  accounts,  how  closed    

.     par. 

92,  93,  94 

52 

Personal  accounts,  rules  for  journalizing    . 

.     par. 

54 

35 

Postal  information     

.     par. 

118 

77 

Posting,  defined          

.     par. 

66 

.  48 

Poultry  accounts        

.     les. 

6 

22 

Private  personal  accounts           

.     par. 

8 

9 

Profits  and  losses,  analysis  of     

.    les. 

39 

106 

Promissory  note,  defined             

.    par. 

97 

63 

Proof  trial  balance,  defined         .         .         .         . 

.     les. 

22 

58 

Property,  rules  for  journalizing           .... 

.    par. 

54 

35 

Proprietor,  rules  for  journalizing         .... 

.    par. 

54 

35 

Proprietor's  account,  how  to  close      .... 

.    par. 

91 

52 

Receipt,  blank  books          

.     par. 

125 

85 

Receipt,  check  as       

.    par. 

104 

68 

Receipt,  proof  of  payment          

.    par. 

125 

85 

Red  ink  entries,  meaning  of 

.    par. 

90 

52 

Regular  indorser,  defined           

.     par. 

122 

80 

Resource,  defined       

.    par. 

34,80 

26,  50 

Resources  and  liability,  statement  of 

.    les. 

39 

105 

Rules  for  journalizing,  general   

.     par. 

55 

35 

Ruling,  directions  for          

.    par. 

6 

8 

Sales  slips           .        .        .        .        .        . 

Dar. 

120 

79 

Simple  journal  entry           

.     par. 

63 

46 

Saving,  value  of          

.     par. 

9 

9 

Signature,  importance  of    .         .         . 

.     par. 

105 

68 

Single  entry,  defined           

.     par. 

46 

32 

Statements,  financial,  illustrated        .... 

.    les. 

11 

44 

Stationery,  business   ....... 

.    par. 

113 

74 

Stock  set    ......... 

les. 

12 

46 

Students'  accounts     

.    les. 

3 

13 

Success,  foundation  for      

.    par. 

10 

9 

Summaries,  cost          

.    les. 

52 

157 

Summary  of  principles  of  debits  and  credits 

.    par. 

54 

35 

Voucher  check   

.    les. 

46 

127 

This  book  is  DUE  on  the  last  date  stamped  below 


?ormL-9-l5m-H.'^ 


UNIVERSITY  of  CALIFORNIA 

AT 

LOS  ANGELES 
LIBRARY 


